Guideline 4: Assessment of the consumer’s ability to meet his/her obligations under the credit agreement

4.1 When assessing the consumer‘s ability to meet his/her obligations under the credit agreement, the creditor should take into account relevant factors that could influence the consumer’s ability to meet his/her obligations and without inducing undue hardship and over-indebtedness. The factors may include other servicing obligations, their interest rates, and the outstanding principal on such debt; evidence of any missed payments; as well as directly relevant taxes and insurance, where known.

4.2 The creditor should establish sound processes to assess the consumer’s ability to meet obligations under the credit agreement and maintain up-to-date records of those procedures. The creditor should review these processes at regular intervals.

4.3 If the loan term extends past the consumer’s expected retirement age, the creditor should take appropriate account of the adequacy of the consumer’s likely income and ability to continue to meet obligations under the credit agreement in retirement.

4.4 The creditor should ensure that the consumer’s ability to meet obligations under the credit agreement is not based on the expected significant increase in the consumer’s income unless the documentation provides sufficient evidence.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/