Industry News

A former lawyer at the Financial Ombudsman Service has warned that payday loans companies are failing to assess the credit worthiness of applicants and that the law regulating this type of credit is inadequate.

James Ward, associate at Thomson Snell & Passmore,said “There is no time to assess whether they should be lending to the borrower at all, and this is virtually impossible without a face-to-face transaction.”

Figures from the Insolvency Service of England and Wales show that, faced with insolvency, young people are more likely to opt for a Debt Relief Order (DRO) to deal with their debt problems than any other age category. A quarter of the 44,000 people who have entered a Debt Relief Order since 2009 are between the ages of 25 and 34 years old.

Now people in this age group – particularly those with young families – are being urged to seek help immediately if Christmas spending has pushed them into unmanageable debt.

The Financial Services Authority (FSA) has announced plans to introduce “common sense standards” to stop a resurgence in risky mortgage lending.

They want to prevent a recurrence of the irresponsible lending which resulted in some borrowers taking on mortgages which only seemed affordable on the assumption that house prices would always rise.

Many of those borrowers ended up struggling to repay their mortgage and in danger of losing their home. 

According to the British Bankers Association (BBA), continued economic uncertainty is curtailing consumer borrowing with secured home loan approvals falling in September and credit card and overdraft debt increasing only marginally due to interest accrual. Repayment on overdraft and loan facilities exceeded new consumer borrowing by £212m in the month. 

Statistics director at the BBA, David Dooks, said “Households are limiting their borrowing in the face of unemployment concerns and pressure on household finances amid general economic uncertainty,”