Shopping around for personal loans 'may harm record'
22 December 2009 17:38:28
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| Consumers may be penalised for shopping around for personal loans. |
Consumers who shop around for personal loans may find it harder to obtain credit in the future, MPs have warned.
In its latest report, the Treasury Committee points out that by searching around for the best deal, consumers build up a record of credit application searches that could increase their chances of being turned down or charged higher rates for credit in the future.
Committee chairman John McFall observed: "While it is right to protect consumers from potentially reckless lending, equally they shouldn't be penalised for shopping around for loans.
"We are today calling on the Office of Fair Trading and Information Commissioner to look into the credit market, following an inquiry which sparked concerns amongst the Treasury Committee about just how fairly and openly it is operating."
Loan providers currently have access to over 400 indicators to assess an applicant's suitability for a personal loan or credit card.
However, the Treasury Committee found no evidence that data on previous application searches were essential to making a reliable assessment.
The Finance and Leasing Association welcomed the committee's report, in particular its recognition of the need for a balance between preventing fraud and allowing consumers to shop around.
Head of consumer finance Fiona Hoyle noted: "Credit companies have already responded to the increasing popularity of shopping around online for credit by raising the number of searches shoppers can make without making a difference to their credit score."
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