No income checks for loans: uSwitch |
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Wed, 08 Nov 2006 10:35
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LONDON - Banks in UK are loaning out colossal sums of money to customers without checking whether they are in a position to return it back, according to price comparison service uSwitch.com.
Figures show that a whooping £11.9 billion was loaned out by lenders without performing even the basic checks necessary for lending sums including checking borrowers' income and outgoings. The research was conducted on the behalf of YouGov.
Of the 4,500 adults studied, the research found that over 70 percent of the loan applicants were given loans without the banks asking for even the proof of income while almost 83 percent of the applicants were not asked for a monthly outgoings, thereby lending out huge amounts compared to income.
According to the figures, 7 of the applicants were given loans more than 125 percent of their salary while over 14 were given loans ranging from 75 to 100 percent of their salary. With the number of people struggling to repay their debts and the number increasing every month, banks are increasingly coming under pressure for their practices.
uSwitch believes that their research shows that the Banking Code Standards Board have failed in their approach to strengthen existing lending practices and boost consumer protection, which requires lenders to perform more stringent checks on the financial conditions of prospective borrowers.
Says Nick White, director of financial services at uSwitch.com, "This is yet another example, if one were needed, that the Banking Code is not working in its current form and that income and affordability checks need to be made compulsory. With one person in the UK falling victim to insolvency every minute of the working day, you might think that the lenders would have learnt their lesson after record write-offs on bad debts -- but the profits to be made are obviously too good to resist."
The report comes just days after official figures revealed that bankruptcies and IVAs hit an all time high.
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