Lenders take up responsibilities

by Gill Montia

Story link: Lenders take up responsibilities

The Chancellor of the Exchequer’s recent call for banks to exercise responsible lending has been followed by a number of lenders reducing their borrowing limits.

Fears over bad debt, combined with the difficulty in borrowing money on the global markets, are making their mark amongst consumers.

This week Barclaycard reported that it is turning down around half of applicants for its credit card.

In the past 12 months bad debt on Barclaycard increased to £1.5 billion and the company is employing various strategies to reduce this.

Since the end of 2006, the UK’s largest credit card provider has cut credit limits for 500,000 existing customers who were considered to be overstretched.

This work is continuing, with customers being examined on a case-by-case basis, and by using information available from other lenders, under industry data-sharing procedures.

Some customers are allowed to retain their credit limits but have the amount of cash they can withdraw reduced.

Research shows that those using their credit cards to withdraw cash are more likely to be struggling with debt.

HSBC has responded to calls for sensible lending by contacting customers who have overdraft facilities and credit cards they do not use, to see if they are still needed.

Banks providing home loans to those with a poor credit history, the self-employed and first time buyers who want to self-certify their income, have made wide ranging changes in recent weeks.

Some have withdrawn mortgage products and others have raised their standard variable rate by around 2.5%.

In some cases loan rates for this group have increased to an incredible 11.5%.