Identify the obligations rather than just the balance
An outstanding loan balance is not the same as the payment amount due next month. Existing instalment loans, mortgages, revolving cards, overdrafts, leases and contractual commitments can require different cash-flow treatment. A creditor should identify the obligation's borrower, repayment schedule, currency, due dates, rate and anticipated end date. A recently repaid debt may still appear on a bureau file, while a newly opened facility might not yet be reported. Neither record should be accepted without considering freshness and conflicting application information. Avoid assuming every credit line's full limit must be treated as an immediate monthly payment. Instead determine which obligations and estimation methodology the applicable law and product require, and document the rationale.
Debt service within UK affordability assessment
FCA CONC 5.2A.17 covers a reasonable determination or estimate of non-discretionary expenditure in relevant cases. CONC 5.2A.18 explains that payments under credit and mortgage agreements may form part of that expenditure and discusses priority debts, contractual obligations and proportionate analysis of indebtedness against income. Creditor systems should therefore separate actual repayment commitments from generic unsecured debt totals. Where obligations are shared, the rule's guidance allows appropriate consideration of the part a customer is reasonably expected to pay. Assumptions need an evidential basis, particularly when other information contradicts statistical averages. A firm that knows a customer already faces substantial debt payments cannot reliably treat a generic living-cost estimate as the complete affordability picture without considering those obligations.
EU CCD2 and the existing-law transition
Article 18 of Directive (EU) 2023/2225 requires creditworthiness assessment with adequate, relevant and accurate information concerning the consumer's financial circumstances. Existing debt and recurring repayment commitments can be relevant to the consumer's ability to meet a new agreement. The revised national implementing measures generally apply from 20 November 2026; before then, applicable national consumer-credit law and any transitional measures require review. The Directive should not be treated as imposing one uniform debt-to-income percentage across all Member States. Product type, information access, national requirements and privacy rules influence the operational process. Keep a country-specific register of obligations, information sources and any prescribed methods, and update it when new implementing law commences.
US mortgage rules and credit reporting
Certain US covered mortgages are subject to ability-to-repay requirements in Regulation Z section 1026.43, which addresses consideration of relevant debt obligations and other prescribed factors. This does not impose the identical mortgage calculation method on all credit cards or instalment loans. ECOA and Regulation B continue to govern nondiscriminatory credit decisions and defined adverse-action obligations. A credit bureau can support verification of outstanding debts but may lack current payment data and may reflect disputes or reporting delays. Lenders should also consider relevant state law and product-specific federal requirements. Where a payment estimate is used, preserve the reason for the estimate, its source and the operative methodology. A high balance alone is not a sufficient legal conclusion about affordability.
Reconciling duplicates and commitments
The same liability may appear in an application, a bank transaction feed and multiple bureau records. Adding the three amounts could triple-count one debt. Conversely, the absence of a bureau record does not prove no obligation exists. Controls should reconcile creditor identity, account references, payment frequency and reported balances while respecting privacy restrictions. Distinguish a scheduled loan payment from an extra voluntary overpayment, a credit card purchase from a card repayment, and a one-off transfer from a recurring obligation. Joint debts require documented attribution, and a refinance should not automatically be assumed to extinguish the old obligation before settlement occurs. Review whether a balloon payment, variable-rate reset or near-term maturity materially changes the assessed cash flow. Flag inconsistent evidence for manual consideration.
Assess the proposed loan alongside existing debts
The central operational question is what happens when the proposed repayment is added to relevant existing commitments. A creditworthiness decision should connect the new loan's amount, rate, payment interval and duration with the consumer's existing payment dates and available resources. Scenarios involving irregular wages or seasonal expenditure may matter even where an annualised ratio looks comfortable. The proper assessment can be proportionate, but proportionality is not a licence to ignore material warning signs. Review whether existing commitments are ending, increasing or being consolidated and which outcome is actually supported by evidence. A future reduction in debt service should not be assumed simply because refinancing is planned; test conditions, payoff dates and how the transaction will be completed.
Evidence, controls and review triggers
An auditable debt schedule records each material obligation's provider, borrower, amount outstanding, payment due, reporting date, source, estimated or verified status and classification. Reconcile it to relevant expense categories and new-loan calculations. Retain the policy version, exceptions and reviewer decision. Tests should include recently opened loans, joint accounts, short-term credit, duplicate bureau entries, foreign-currency obligations and active disputes. Periodic assurance can compare underwriting estimates with subsequent hardship and complaints to detect systematic undercounting. Changes in FCA CONC, national CCD2 implementation, mortgage rules or data-provider reporting practices should trigger review. The objective is a reproducible decision grounded in relevant obligations, not a rigid universal ratio detached from law and context.
Frequently asked questions
Does one data source establish affordability?
No. The adequacy of the assessment depends on the governing law and the reliability and coverage of all relevant information.
When do CCD2 implementing requirements generally apply?
20 November 2026, subject to national law and transitional provisions.
Are a creditor's data access rights unlimited?
No. Permissible purpose, privacy, accuracy and related restrictions must be assessed.
Primary sources
Directive (EU) 2023/2225 Articles 18–19 ↗FCA CONC 5.2A ↗CFPB Regulation B ↗CFPB Regulation Z 1026.43 ↗US Fair Credit Reporting Act, 15 USC 1681 ↗Read the source in its current version. National implementing measures and product-specific applicability may require additional research.