FCA demands proof that banks are lending with care

As many finance industry commentators and observers become increasingly concerned about the UK's level of personal debt, the FCA has demanded that banks provide evidence that they are not making loans or approving credit products to customers who are already struggling with unmanageable debt.

The FCA is keen for banks to improve when it comes to identifying potential customers who are deemed to be "at risk" of financial problems. Described as "vulnerable customers", these individuals may have a history of missed repayments, or may already be struggling to service other financial products.

With comparatively low interest rates currently available in the UK, financial products including unsecured personal loans and credit cards are very widely and easily available. This availability has triggered FCA concerns that British customers could be making irresponsible use of credit, placing themselves at risk of entering debt spirals.

Over the past year, borrowing (including credit cards, car loans and personal loans) has risen by 10%. This rise has taken place over a period in which wages grew by just 1.5%. These statistics have prompted worries that consumers could be building up debts they could soon find themselves unable to repay.

The FCA's demands may be an understandable response to potential repayment problems, designed to protect the most financially vulnerable. However, the authority's requests ignore big differences between consumer's individual financial circumstances, ignore their ability to make informed choices about their money and enforce a "blanket approach" to lending, which makes it more difficult for responsible individuals to access the finance they want.

Do you think the FCA's demands are valid? Have you found easy or difficult to access finance in recent months? Have your say or ask our experts about arranging an unsecured loan.