Cashfloat Highlights the Benefits of Responsible Affordability Assessments for Both Borrowers and Lenders
As borrowing costs and household financial pressures continue to influence consumer credit decisions, there is growing awareness among borrowers of the importance of understanding both the cost and affordability of credit. Responsible lending remains a key principle within the UK's consumer credit framework. The Financial Conduct Authority (FCA) expects firms to undertake proportionate affordability assessments before granting credit, taking into account the borrower's individual circumstances and the nature of the lending. The FCA's Consumer Credit Sourcebook (CONC) provides guidance on responsible lending practices and the factors firms should consider when assessing affordability.¹
Affordability assessments are becoming an increasingly important part of responsible consumer lending as regulators and lenders seek to ensure borrowing remains sustainable. Regulated lenders, including Cashfloat, incorporate affordability assessments into their lending processes as part of this broader framework.
While consumers may assume that lending decisions are primarily based on credit scores, affordability assessments provide a broader picture of an applicant's financial circumstances and are incorporated into the processes of regulated lenders.
The Relevance of Affordability Evaluations Within Lending Decisions
Affordability checks are a key element of responsible lending. They provide lenders with the opportunity to assess whether a proposed loan is suitable based on each applicant’s financial circumstances, rather than relying on historical borrowing behaviour.
Financial Conduct Authority regulation does not prescribe a set affordability assessment process. Instead, lenders are expected to make proportionate assessments based on factors such as the type and value of the credit requested and the potential risks involved.
Depending on the specifics, lenders may consider income, regular outgoings, existing financial commitments, and other factors when deciding whether repayments are likely to be sustainable.
This approach recognises that financial positions may vary considerably between borrowers, and that no two applications are identical. It also enables lenders to make decisions that reflect the risk level associated with each application.
From a consumer perspective, affordability checks offer reassurance that lending decisions are based not only on whether the lender can offer credit, but also on whether repayments are expected to remain manageable throughout the loan term.
Key Considerations for Borrowers Undergoing Affordability Assessments
Consumers applying for any form of credit can typically expect an affordability assessment, and having the appropriate information available may make the loan application process more straightforward. They should be aware that:
Lenders may consider up-to-date financial information during an application, alongside past data within credit reports.
Borrowers should consider whether repayments are manageable for their own circumstances, alongside the lender's affordability assessment.
Different lenders may have their own policies and affordability assessment processes, or might request more information or evidence, such as payslips and bank statements.
Consumers should be prepared to share accurate information about their financial position and ensure they understand the cost of borrowing and the repayment obligations they are agreeing to before signing or approving any loan or credit agreement.
Borrowers also have access to independent resources that can help them better understand borrowing decisions and manage their finances. Organisations such as MoneyHelper provide impartial guidance on budgeting, borrowing and debt management, while the UK Financial Ombudsman Service helps resolve disputes between consumers and financial services providers where appropriate. These resources can support consumers in making informed financial decisions alongside the information provided by lenders.²
How Emphasising Affordability Supports Better Consumer Outcomes
Responsible lending encourages informed decision-making while helping reduce the likelihood that borrowers might experience financial difficulty and that lenders may find themselves needing to pursue outstanding debts.
Affordability assessments also form part of the wider regulatory framework intended to ensure consumers receive appropriate information and are offered credit only when it is assessed as responsible.
This contributes to greater transparency, with Chief Operating Officer Peter Kimpton speaking on behalf of Cashfloat, saying that “Affordability assessments are an important safeguard, because they allow lenders to look beyond financial scores, and consider, in the context of an applicant's overall circumstances, whether repayments are likely to be manageable.”
“Responsible lending isn't about approving more or fewer applications. It's about ensuring consumers have access to clear information and that lending decisions take into account their individual income and existing commitments. Consumers also play an important role by ensuring the information they submit is correct, reviewing documentation carefully, and taking the time to understand their obligations.”
About Cashfloat
Cashfloat is a UK-based lender offering online consumer lending products, subject to eligibility and affordability assessments. The company is authorised and regulated by the Financial Conduct Authority.
Media Contact:
Ofer Valencio Akerman
WCL Success Mastermind & Mentor
+44 20 3757 1933
