The FLA is opposed to discrimination in any form. The FLA’s Lending Code, which is binding, requires its members not to discriminate on the basis of race, sex, disability, ethnic background or gender.
Nevertheless, age is an important factor in establishing risk. Let us take a well recognised example from the insurance industry. Younger drivers are much more likely to have a motor accident than older drivers. This is reflected in their insurance premiums. Some might describe the practice of charging high risk drivers more to cover their extra costs as ‘age discrimination’. Most people, however, recognise that it would be unfair to expect safer drivers to subsidise high risk groups.
Age is also an important factor in FLA members’ credit risk models, to ensure that responsible lending decisions are made. Age is a well-established indicator of the likelihood of default on a credit agreement. To remove age as a factor from risk modelling would lead to increased costs both to the industry and to the consumer. It would also lead to less responsible lending decisions.
Equality Act 2010
Clause 190 of the Equality Act enables the Government to allow certain age-based treatment in particular circumstances. Following lobbying from the credit and insurance industries, a supplementary Order was drafted, which allows for lenders to keep age as a factor in the credit scoring process.
The Order is due for implementation in October 2012.