CAB launches attack on sub-prime lenders
January 1, 2008
The Citizen’s Advice Bureau has launched an attack on sub-prime lenders in the UK, claiming that these lenders often offer loans to consumers that cannot afford the repayments and then use aggressive tactics when the consumer falls behind on repayments.
Sub-prime loans are those offered to people with poor credit, self employed, or no proof of income. However, in response to the attack the Council of Mortgage Lenders has accused the Citizen’s Advice Bureau of being ’simplistic’ and ’sensationalist’.
CML official stated: “The vast majority of mortgage customers receive a high level of help and care from lenders of all kinds if they fall into difficulties, in accordance with the rules set out by the Financial Services Authority. The allegation that they default too quickly to court action is an assertion that is not borne out by the typical practices and processes of specialist lenders.”
In the report, which was entitled Set up to Fail, the Citizen’s Advice Bureau stated: “Dubious advice from brokers, irresponsible lending decisions and aggressive arrears management by sub-prime lenders are driving the current increase in mortgage arrears, court action and repossessions.”
An official from the CAB said: “Our research suggests that many aspiring home owners have been mis-sold unsuitable and costly home loans that are doomed to fail from the start.”
He added: “Many sub-prime lenders are flouting the rules on responsible lending by granting loans when it’s clear the borrower will not be able to afford to repay it from the very outset, then getting tough immediately things go wrong.”
In order to compile the report the CAB looked at over 1200 case studies involving people that had sought advice from the CAB in relation to this issue.
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