Responsible lending code should apply to all

Lenders who offer loan deals to customers outside the banking system should be brought into line with the banking industry’s code on responsible lending, the British Bankers’ Association said today.

Lenders other than banks are accounting for a growing proportion of instant loans and credit deals to UK consumers, but these lenders fall outside the remit of the Banking Code and therefore are not protected by its provisions for responsible lending, writes BBA Chief Executive Angela Knight CBE in a letter to Shadow Treasury Minister Mark Hoban MP.

Banks study thoroughly a customer’s circumstances using internal controls and credit reference agencies and throughout they adhere to the provisions of the Banking Code. However increasing numbers of firms are extending credit to borrowers who do not meet their bank’s criteria. The consequences for overstretched individuals could be serious, said Mrs Knight.

“When a gap opens between what a borrower wants and what a bank wants to lend, too often an irresponsible lender steps in. Only around 63 per cent of unsecured borrowing now comes from the banks. There are certainly responsible lenders among the rest, but how is a consumer to know who they are or what their lending rules are?”

The letter coincides with the publication today of Lending Money Responsibly, a free BBA factsheet containing the relevant sections of the Banking Code and a five-point responsible borrowing plan for consumers.