Lenders criticised for 'insubstantial loan checks'

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Lenders criticised for 'insubstantial loan checks'

Fri 4th Apr 2008

Lenders have come under fire from uSwitch.com for continuing to make insufficient credit checks during the unsecured loan application process.

The price comparison and switching service found that 70 per cent of loan applicants - which amounts to 2.9 million people - were not asked for proof of income to substantiate the information they had provided.

Moreover, less than one in four of those taking out loans for debt consolidation purposes actually closed down existing debts that should have been cleared with the new loan.

Bearing these figures in mind, the website is asking whether the recent changes to the Banking Code will be enough to ensure that companies lend responsibly.

Earlier this week, the code was amended to stipulate that lenders must now carry out a credit reference agency check alongside at least one of the following three checks; income and financial commitments, historical financial behaviour or credit scoring.

Mike Naylor, personal finance expert at uSwitch.com, said: "As consumer debts increase by £1 million every five minutes, there is clearly a need for watertight measures to be put in place to ensure that the banks are lending responsibly."

A recent survey from moneysupermarket.com revealed that around 30 per cent of Brits are seriously concerned about their financial future.

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