7 November 2006
Research from the price comparison and switching website uSwitch has revealed that in the last year, almost eight out of ten borrowers were issued loans without the lender carrying out any checks to verify that they could afford to repay the debt.
In addition, almost 1.6 million loans have been approved without properly verifying people's incomes, equating to approximately 70% of those seeking them.
Other worrying findings revealed by the research included the fact that a third of those whose applications were successful were not asked if they had any previous credit agreements.
uSwitch's director of financial services, Nick White warned: "If this situation doesn't improve in the near future, serious questions need to be raised over the effectiveness and suitability of self-regulation.
"The government may need to intervene to impose more effective guidelines on the existing income and affordability procedures exercised by the banks on the sale of unsecured lending products," he added.
The Banking Code Standards Board (BCSB) made a series of changes on April 1st 2006 in an attempt to offering greater protection to consumers and strengthening existing lending practices, but it would appear that these measures have not helped.
"Our evidence suggests that the changes introduced by the BCSB have so far let consumers down but they have also failed to curb the serious failings in the affordability checking regime adopted by providers," said Mr White. "Urgent action needs to be taken to address 'binge-lending' practices."
uSwitch.com's loans comparison service provides an impartial search of the loans market to find the best loan for you.
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