PERSONAL FINANCE: Loans Approved without Income Check

The Birmingham Post (England), November 11, 2006 | Go to article overview

PERSONAL FINANCE: Loans Approved without Income Check


Banks are risking the financial well-being of customers by allowing 70 per cent of successful applicants to take out loans without first checking for proof of income, it is claimed.

Price comparison website uSwitch.com said it had uncovered overwhelming evidence of "systematic failures" in the way in which loans are issued.

It found that in the last 12 months almost eight out of ten borrowers were granted loans without the lender carrying out any checks to verify that they could afford to repay the debt.

Also, nearly 1.6 million advances were approved without proper checks on applicants' income.

UK lending on unsecured loans over the last six months amounted to pounds 17.1 billion, according to recent statistics.

But pounds 11.9 billion of this was issued ignoring basic checks on customers' income and outgoings, it was claimed.

This is despite changes to the banking code in April aimed at giving greater protection to consumers and strengthening existing lending practices.

Evidence of bad practice allegedly uncovered by uSwitch includes lenders granting loans in excess of annual incomes and granting applications from people without regular work.

Lax procedure has led to people lying about their income on loan applications, with some adding up to 30 per cent to their actual salary, it was alleged. …

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