£20 billion worth of unsecured loans handed out without adequate checks
May 19, 2008
According to a recent report £20 billion worth of unsecured loans has been handed out over the past year without adequate checks being carried out with regards to the income of the borrower. The report indicates that many lenders have not been asking for proof of income from the borrower before agreeing these loans, despite the tighter credit conditions that are supposed to have come into play as a result of the ongoing global credit crunch.
Research carried out by uswitch.com shows that nearly three million unsecured loans have been handed out over the past year without proof of income being obtained from the borrower. The report also claims that over 620,000 borrowers were not even asked how much they earned on their application for before being granted a loan. Banks have claimed in the past that the reason why many people are not asked for income details is because so many consumers apply for loans to their existing banks, and therefore the lender will usually already have income details.
However, the recent study shows that nearly half of applicants did not apply to their own banks, which meant that these lenders would not have the details of the applicants’ income.
One official from uswitch stated: “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.”
Recent additions:
- Many cardholders missing out on their rewards
- Spending levels to be slashed by many
- Loans and mortgages still inaccessible due to credit crunch
- IVA customers could get additional protection
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