No income? You can still get a credit card

‘Irresponsible’ banks fuel record debt binge by relaxing rules

BANKS are helping fuel a dangerous debt binge by offering credit cards to families with little or no income.

Providers have dramatically relaxed their lending criteria, a Daily Mail investigation shows.

Three quarters of all credit cards now take applications from customers earning nothing. Lloyds, Halifax, Sainsbury’s, Yorkshire Bank and M&S have no minimum income requirement.

And Barclaycard, the biggest credit card provider, has slashed the salary threshold. Five years ago, 82 credit cards demanded applicants earn at least £10,000 a year. Today, just 31 cards have the same criteria.

The Office for National Statistics said yesterday that household borrowing has rocketed to its highest level since records began in 1987. And the savings ratio – disposable income put aside – now stands at 3.3 per cent, the lowest since 1963 – when those records began.

Economists warned last night of echoes of the lead-up to the 2008 financial crisis.

‘The UK consumer increasingly appears to be living beyond their means,’ said John Hawksworth of accountancy firm PwC.

‘This cannot continue forever as inflation rises further above target over the course of this year, squeezing real earnings.’ Rachel Springall of the Moneyfacts website warned: ‘The temptation to borrow in such a cheap interest environment is so high, and borrowers could easily have their debts get out of control.’

Household net borrowing rocketed to more than £11billion in the last three months of 2016.

The ONS said this was partly due to a rise in consumer spending despite people feeling poorer. The Bank of England is so concerned by the levels of consumer debt it has launched a major review of lending practices.

Workers must now earn an average of just £8,600 a year to be eligi- ble to apply for a credit card, compared with £21,500 in 2012. But 73 per cent of credit cards now set no minimum income at all, data firm Defaqto says.

Brian Brown, of Defaqto, said: ‘The market seems to be relaxing. It appears there is a feeling they are past the bad old days and they can start taking risks again in the knowledge they will probably get their money back.’

Peter Tutton, from debt charity StepChange, said: ‘New evidence of lenders reducing minimum income requirements is likely to make a bad situation worse.’

Benefits including jobseekers’ allowance, carers’ allowance and disability living allowance, plus child maintenance payments, are considered as income by some providers.

Barclaycard used to demand all applicants earned at least £10,000, with some accounts requiring an income of £20,000. But five years on, it now has no minimum income threshold on the majority of its cards, according to Moneyfacts.

In 2012, Lloyds asked for minimum earnings of at least £15,000 a year on almost half of its cards, but this requirement has now been

Debt-binge Britons stick £20million a day on credit cards From Thursday’s Mail

axed. John Lewis is one of the few providers to tighten its criteria, lifting its minimum threshold gradually from zero in 2012 to £6,750 this year. It said it wanted to be a ‘responsible lender’.

Labour’s Wes Streeting, a member of the Commons Treasury committee, warned of ‘irresponsible lending to families that can barely afford it’. He added: ‘It’s time for the Government and the Bank of England to step in.’

A Lloyds spokesman said: ‘Whilst we do not quote a minimum income threshold for credit card applicants, this is one of a number of factors considered as part of an affordability assessment.

‘All of our lending decisions are driven by our commitment to be a low-risk, responsible lender.’

A spokesman for Barclaycard said: ‘Affordability is much more than just a factor of income. The credit limit we set is based on the affordability of the product and the applicant’s ability and willingness to pay it back.’

Providers including Argos, Capital One, Vanquis, Aqua and Very are also among brands that will consider applications from the unemployed, according to the website Money.co.uk.

A spokesman for Vanquis said: ‘Whilst being unemployed does not automatically preclude someone from being accepted for credit, in most cases it would make it less likely that they will be accepted.’

Fiona Hoyle, of the Finance and Leasing Association, said: ‘ Each lender will have their own specific way of checking their customers’ credit worthiness, and this is taken very seriously because, ultimately, it is not in their interest to provide credit to anyone who cannot make the repayments.’

Yorkshire Bank said it reviewed a customer’s employment situation, income, existing debts, credit rating and other commitments such as rent and bills when considering an application.

IN a worrying sign banks and regulators have learnt none of the lessons of the 2008 crash, the Mail today reveals details of deeply irresponsible credit card lending.

Five years ago the average applicant required an income of £21,500 to get a card, a figure that now stands at just £8,600. Indeed, three quarters of credit cards – including those issued by M&S, Sainsbury’s and Lloyds – have no minimum income requirements at all.

Shamefully, some even allow the unemployed to count their jobseekers’ allowance as income when applying.

Debt charities rightly worry that families are borrowing large sums they have no prospect of repaying. Once the tempting zero rate deals used to lure them in expire, lenders often impose usurious double digit interest.

As consumer borrowing rises at its fastest rate for 11 years, this is a recipe for disaster. The Bank of England rightly stepped in when the mortgage market was overheating two years ago, and its review of consumer lending is equally welcome.

With credit card debt totalling nearly £70billion, this is an economic bomb just waiting to go off.