On 28 March 2017, the Lending Standards Board (LSB) published the new Standards of Lending Practice (SLPs) for business customers. The new rules for personal customers were launched in 2016; see our previous blog for more on this.
These new rules for business customers will apply from 1 July 2017. Until then, the current provisions of the Lending Code will continue to apply.
The new SLPs replace the micro-enterprise provisions of the Lending Code and relate to the following main areas:
- Product information.
- Product sale.
- Declined applications.
- Product execution.
- Credit monitoring.
- Financial difficulty.
- Portfolio management.
- Governance and oversight.
Who will they apply to?
The new standards go beyond the current protections for micro-enterprise lending to extend to small businesses that, at the point of lending, have an annual turnover of up to £6.5 million in the last financial year, and which do not have a complex ownership structure (for example, businesses which trade overseas or have multiple/layered ownership regimes). The current micro-enterprise requirements apply to businesses that employ fewer than 10 persons and have a turnover or annual balance sheet that does not exceed €2 million. We can therefore expect to see many more entities benefitting from the SLPs.
They will be independently monitored and enforced by the LSB and, like the Lending Code, are being sponsored by two industry trade bodies; the British Bankers’ Association and the UK Cards Association.
How is the Lending Code changing?
One fundamental difference with the SLP provisions, when compared with the Lending Code, is that they move away from their predecessor, which was focused more on compliance with provisions than customer outcomes. Each section of the SLP contains both a customer outcome and an overall statement of how a firm will achieve it. The new rules send a clear message to organisations that transparency and fair treatment of customers is now under scrutiny.
Defined as an opportunity to rebuild trust and confidence in the industry, the rules bring enhanced protections that operate from the initial product offering and application process through to account servicing and portfolio management. Business customers will know exactly what to expect from a lender who will in turn need to be focused on fairness and supportiveness.
This blog post was written by PSL assistant Elliot Gibson, for further information, please contact:
Joanna Belmonte, senior associate and PSL, Banking & Finance
T: 0161 836 7809