Not enough evidence asked for with Billions of pounds worth of unsecured loans taken out
03/05/08
It seems that around twenty billion pounds worth of personal loans were taken out last year without enough research into borrowers’ income according to a recent report. The report which was carried out by uswitch.com found that as many as two thirds of unsecured loans taken out in 2007 were done so without adequate checks. This could be problematic to the lenders as they have no way of knowing whether the borrower can pay the money back.
It seems that out of a total of around £30 billion pounds worth of unsecured loans taken out during this time, the results from uswitch suggest that almost £21 billion was the amount that was given without proper checks carried out. Unsecured loans are different to personal loans as the lender does not have a means of security as such with an unsecured loan therefore making borrowing the money more risky.
An official from uswitch commented that “With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders would have learnt their lesson, but the potential profits have clearly been too good to resist. While the credit crunch has forced lenders to tighten up their lending criteria, these latest amendments to the Banking Code do not go far enough to help promote responsible lending in all cases.”
He then went onto say that “Further credit checks could be costly and no doubt the bill would be passed back to consumers. However, it could be a small price to pay if it helps to curb the rapid growth of debt which is spiralling out of control. We cannot ignore the fact that consumers have a responsibility to borrow sensibly, but lenders really aren’t helping. As consumer debts increase by £1 million every five minutes, there is clearly a need for watertight measures to be put in place to ensure that the banks are lending responsibly.”
