Unsecured lending plummets

by Gill Montia

Story link: Unsecured lending plummets

The consumer credit market is shrinking fast and Britons could be faced with even less choice and access to credit in future.

So says the Finance and Leasing Association (FLA), which has just published its latest unsecured lending figures.

According to the FLA, the unsecured loan market contracted by 83% in April compared to a year earlier and the month also saw a 45% drop in the value of loans granted.

The body, which represents the UK’s unsecured lenders, blames the collapse on new consumer credit regulation (both from Brussels and the UK regulators) and the continued freeze in the wholesale lending markets.

According to the Association, both have put extra pressure on lenders “just when they are being called upon to help reinvigorate the economy”.

FLA chief economist, Geraldine Kilkelly, comments: “These figures … reinforce the need for the Government to take action to make wholesale credit available, including in the non-bank lending market.”

Failure to do so could “pose the real risk that the size of the market will reduce even further, with serious implications for consumers – especially those who are most vulnerable.”

Mr Kilkelly fears that some consumers may turn to unregulated lenders if access to consumer is cut off and urges the Government to take account of this and other risk in its forthcoming Consumer White Paper.

FLA members provided £60.2 billion to the consumer sector in 2008, representing almost 30% of all unsecured lending in the UK.