Lenders bat­tle fi­nan­cial watch­dog over risky loans

The Sunday Telegraph - Money & Business - - Business - By Iain Withers

A CRACK­DOWN by fi­nan­cial watch­dogs on risky con­sumer loans could back­fire and harm bor­row­ers, lenders have claimed.

A trade body for com­pa­nies be­hind £88bn of credit last year is bat­tling Fi­nan­cial Con­duct Author­ity (FCA) plans to tighten the lend­ing rules.

The Fi­nance & Leas­ing As­so­ci­a­tion (FLA), whose mem­bers of­fer prod­ucts in­clud­ing credit cards, re­tail fi­nance and car loans, ob­jects to many of the planned changes. Lenders would be re­quired to take ex­tra steps to en­sure a per­son’s cred­it­wor­thi­ness, in­clud­ing only fac­tor­ing in an ap­pli­cant’s in­come rather than “house­hold” means.

A draft FLA con­sul­ta­tion re­sponse, seen by The Sun­day Tele­graph, crit­i­cises the ex­clu­sion of house­hold in­come as a “ret­ro­grade step in the drive to pro­mote fi­nan­cial in­clu­sion”. It also ar­gues the FCA has pow­ers to stop risky lend­ing un­der the ex­ist­ing regime and says the reg­u­la­tor’s “overly pa­ter­nal” ap­proach “ab­ro­gates the cus­tomer from any re­spon­si­bil­ity”.

One lender, who pre­ferred to re­main anony­mous, likened the FCA plans to “ban­ning al­co­hol and mak­ing it only avail­able via your doc­tor be­cause some peo­ple are al­co­holics”.

Ex­perts have re­peat­edly raised the alarm about ris­ing con­sumer credit – which has out­stripped wage growth – with the Bank of Eng­land warn­ing lenders risk los­ing £30bn if the econ­omy wors­ens.

Lenders in­clud­ing Prov­i­dent Fi­nan­cial and Bright­house have faced crit­i­cism over ir­re­spon­si­ble lend­ing and been forced to pay com­pen­sa­tion. A spokesman for the FLA said: “We are work­ing with the FCA to en­sure that re­spon­si­bly pro­vided credit con­tin­ues.” The FCA de­clined to com­ment.

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