No proof of income required for credit card applicants
84 per cent of successful credit card applications in the last 12 months were approved without customers to providing proof of their income. A staggering £17 billion worth of credit limit was approved on this basis!
These new figures from Uswitch.com reveal that the banks and credit card companies are still putting consumers and themselves at risk, and all this comes just months after the credit crunch.
UK debt is around 1.4 trillion and banks have been forced to write off £17.3 billion becuase of the bad debt credit crunch.
The annual Credit Card Affordability report from Uswitch.com revealed that 84 per cent of new credit cards, were approved with no proof of income or outgoings and the average credit limit was £3,545. This equates to over £17 billion worth of credit approved by banks and credit card companies.
Surely the most important factor in this situation is to check that the customers can actually afford to repay the credit they are taking out!? That is the basic, fundamental, cause of the credit crunch - people could not afford to make the repayments on their mortgages and all the investments that were tied up in the sub-prime mortgage market went bad. Every financial organisation involved in that process wanted it’s money returned.
77 per cent of people didn’t get their credit card from their current account provider, which makes this issue even worse. If customers had applied for a credit card managed by their bank at least there would have been access to current account information to understand the spending habits and affordability of these potential credit card customers.
Head of personal finance at uSwitch.com, Simeon Linstead, comments: “We cannot ignore the fact that the credit crunch has forced lenders to tighten their belts and reject applications that may lead to further write-offs. The fact remains that just because a consumer appears to have a ‘suitable’ credit score, it doesn’t mean they are always honest about their income and actually have the cash available each month to pay the bill. The credit squeeze will back some consumers into a corner and, in sheer desperation, people will resort to lying about their salaries as this is such an easy loophole to exploit.”
“Back in April, we uncovered that £20.9 billion was advanced in personal loans in the previous 12 months without any income checks being carried out - so this problem is not exclusive to the credit card market. Further credit checks could be a costly exercise for the lenders and could lead to a decline in the number of accepted applications. However, it could be a small price to pay if it helps to curb bad debt write off’s and personal indebtedness.”
“We cannot ignore the fact that consumers have a responsibility to borrow sensibly, but lenders need to help the process and tighten their credit checking procedures. It is too early to say if the amendments to the Banking Code are resolving these problems but there is clearly an urgent need for watertight measures to be put in place to ensure that the banks are lending responsibly.”