Loan approvals ‘forgo income checks’

Posted 2008-04-3

UK banks issued approximately £20.9 billion worth of loans last year without checking peoples income, new research has suggested.

According to uSwitch some 70 per cent of loan applicants were not asked to provide evidence of their earnings, while 15 per cent were not asked about their income at all on application forms.

Industry experts have reacted angrily to the report, noting that the US sub-prime crash which kicked off the current credit crunch was brought about by irresponsible lending across the Atlantic.

Mike Naylor, personal finance expert at uSwitch, bemoaned: "With more than 7,716 loan repayments being missed every day and record write-offs, you might think lenders would have learnt their lesson, but the potential profits have clearly been too good to resist."

He went on to say that the new Banking Code - which is intended encourage responsible lending - "does not go far enough" to stop financial institutions from issuing crippling loans to consumers.

Advocating tighter measures, Mr Naylor added: "Further credit checks could be costly … However, it could be a small price to pay if it helps to curb the rapid growth of debt which is spiraling out of control.

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