Credit Contracts and Consumer Finance Act 2003, ss 9C(2), (4), 93, 96
Lenders have certain responsibilities towards you if you give a guarantee for a consumer credit contract. These are similar to the responsibilities owed to borrowers.
Most importantly, before a lender takes a guarantee from you, and in all their later dealings with you in relation to the guarantee, the lender must exercise the care, diligence and skill of a responsible lender. The lender also has these specific responsibilities:
Checking out your ability to fulfil the guarantee – Before you give the guarantee, the lender must make reasonable enquiries so that they’re satisfied you’ll be able to fulfil the guarantee without suffering substantial hardship. The lender is entitled to rely on the information you give them unless they have reasonable grounds to believe it’s not reliable.
Helping you reach an informed decision – The lender must help you to reach an informed decision about whether to give the guarantee and to be reasonably aware of the guarantee’s full implications. As part of this responsibility, the lender must make sure that any information they give you isn’t likely to be misleading, deceptive or confusing, and that the terms of the guarantee are written in plain language and are clear, concise and understandable.
Reasonable, ethical treatment – The lender must treat you reasonably and ethically at all times, including when problems arise, such as the borrower missing their payments.
No oppressive terms or conduct – The lender must make sure that the guarantee isn’t oppressive, that they don’t exercise any of their rights or powers under the guarantee in an oppressive way and that they don’t pressure you by oppressive means into giving the guarantee.
Meeting all legal obligations – The lender must meet all their legal obligations to you, including, for example, the requirements in the Credit Contracts and Consumer Finance Act to provide you with necessary information.
If a lender breaches any of those responsibilities, the courts can order them to pay you compensation, or can make various other orders (see: “Enforcing the credit contract laws against lenders”).