View source for Principles of Responsible Credit

The Principles of Responsible Credit were formulated by the European Coalition for Responsible Credit, a networking and policy influencing association of consumer agencies, academics, and other non governmental organisations formally created in 2006. 

It is not related per se to the Islamic finance industry. 

==Goals==

Goals of the Coalition:

*Further the idea of responsibility in credit and banking and promote a set of principles for responsible credit and fair lending.
*Organise and maintain a continuing dialogue among consumer and money advice organisations, social welfare organisations and trade unions, alternative financial institutions and other NGOs.
*Influence bank thinking, strategies, products and services to benefit underserved and excluded groups.
*Promote the production of research and transparency.
*Organise conferences and other forums that increase people’s and NGO understandings and abilities to promote fair access to lending products and services.
*Act as a collective voice for underserved people to the public with respect to financial services.

==Principles==

Principles:


P1:   Responsible and affordable credit must be provided for all.

:1. Credit is an essential for full participation in society.
:2. Banks should not discriminate and should provide real access.
:3. Credit to Consumers and Small Businesses must be supervised.

P2:   Credit relations have to be transparent and understandable.

:1. Competitive transparency requires a standardized mathematically correct form of “one-price” disclosure (the Annual Percentage Rate of Charge or APRC).
:2. Social transparency requires a standardized pre-contractual payment plan.
:3. Consumers should be provided with adequate time for reflection and with access to independent advice.
:4. Consumers should have access to independent financial, credit and debt advice.
:5. Both parties in the credit markets have to take part in a mutually productive process of financial education.

P3:   Lending has at all times to be cautious, responsible and fair.

:1. Credit and its servicing must be productive for the borrower.
:2. Responsible lending requires the provision of all necessary information and advice to consumers and liability for missing and incorrect information.
:3. No lender should be allowed to exploit the weakness, need or naivety of borrowers.
:4. Early repayment, without penalty, must be possible.
:5. The conditions under which consumers can refinance or reschedule their debt should be regulated.

P4:   Adaptation should be preferred to credit cancellation and destruction.

:1. There is a need for effective protection against unfair credit cancellation.
:2. Default charges should be adequate to cover losses only.

P5:   Protective legislation has to be effective.

:1. Credit regulation has to cover all non-commercial users.
:2. Credit regulation has to cover all commercial forms of credit provision.
:3. Credit regulation has to cover the whole process of credit extension as experienced by its users.
:4. Credit regulation has to encourage efficient social and economic effects of credit extension.

P6:   Overindebtedness should be a public concern.

:1. Profit-driven systems cannot cope with over-indebtedness.
:2. Consumers should have a right to discharge.
:3. Bankruptcy procedures should lead to rehabilitation and not to retorsion.

P7:   Borrowers must have adequate means to defend their rights and be free to voice their concerns.

:1. There should be adequate individual as well as collective legal procedures to enforce borrowers’ rights.
:2. Critical public awareness is crucial for the development a fair and responsible distribution of credit.




==External Links==

* [http://www.responsible-credit.net European Coalition for Responsible Credit]