Millions given credit cards without proof of income

18 June 2008

Lenders need to “tighten their credit checking procedures” says uSwitch

Millions of UK consumers have been granted credit facilities over the past year without having to provide proof of their income according to uSwitch.

According to research by uSwitch, 84% of consumers who applied for credit cards over the past 12 months, and went on to be accepted by the lender, were not asked to provide proof of the income that they had declared to be earning. Some 14% of people were not even asked to provide any information regarding their salaries on their credit card applications.

In the research, uSwitch also found that 5% of respondents had taken to lying about the amount their earned each year just so they could get a credit facility.

The research also revealed that the average limit awarded on a new credit card account was £3,545, which equates to 20% of the average net salary of £18,083.

Simeon Linstead, head of personal finance at uSwitch said: “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.”

In March this year changes to the Banking Code were implemented which require lenders to perform further credit checks before they grant credit facilities.

“It is too early to say if the amendments to the banking code are resolving these problems, but there is clearly an urgent need got watertight measures to be put in place to ensure that the banks are lending responsibly,” added Mr Linstead.

The British Bankers’ Association (BBA) was not pleased with the claims put forward by uSwitch.

“uSwitch is again indulging in fantasy finance,” said a BBA spokesman.

“These simplistic calculations fail to address the real issues facing customers in financial hardship.

“Banks seek to lend responsibly and will look carefully at people’s finances before making credit available. They make checks before lending and do not need customers to provide payslips or bills to prove their income and outgoings,” he explained.