UK Lenders Advance £11.9 Billion In Six Months Without Income Checks
According to research undertaken recently by uSwitch, the competition among UK lenders to provide Brits with loans has become so intense of late that they no longer even bother to undertake simple checks on whether or not Brits have the ability repay.
 uSwitch’s findings show that UK lenders have dished out a total of £11.9 billion in the past six months without checking to see if the borrower will be able to repay the loan. As if this were not condemning enough, YouGov’s latest report shows that 70% of loan applicants didn’t need to show evidence of income and 83% were not asked if they had any outgoings to meet from their income. Indeed, so intense has the competition become among UK lenders to lend money to UK borrowers that UK lenders are now even willing to borrow up to as much as 125% of a borrower’s monthly income!
But is this really the concern of UK lenders? After all, we borrow the money so we should make sure that we can repay it! Not so, changes to the Banking Code six month ago are suppose to be making it harder for us Brits to borrow, with more stringent requirements that we can afford to borrow the money. The reports by uSwitch and YouGov clearly show this is not being done.
It is little wonder then that most UK lenders have had to write-off record amounts of loans in the past 12 months. Moreover, with the UK’s new bankruptcy and IVA rules, according to figures recently released by the Department of Trade and Industry, insolvencies in England and Wales jumped over 50% year-on-year to September 2006.
So who is winning in this war of debt we currently face in the UK? With a financial equivalent to 20% of lenders’ total net profits being written off in bad loans in the past 12 months, UK lenders would be hard pushed to claim they’re coming out on top here. Sadly, a record 27,644 insolvencies in the three month period to September 2006 also clearly shows that UK borrowers are not benefiting greatly from the new lending policies.
Probably the last word lies with Nick White, director of financial services at uSwitch: “With one person in the UK falling victim to insolvency every minute of the working day, you might think that the lenders would have learn their lesson after record write-offs on bad debt – but the profits to be made are obviously too good to resist.”
Richard Smith
12th November 2006
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