Unsecured Loan Market Shrinking

Mon, 29 Jun 2009

Consumers in the UK could face even less choice and access to credit in the near future, according to the latest findings from the Finance and Leasing Association (FLA) which show that the consumer credit market is shrinking.

The FLA’s recently published consumer lending figures reveal that the unsecured loan market contracted by 83 per cent in April 2009 compared to the same period in 2008, while the value of loans granted dropped by 45 per cent over the same period.

Total consumer lending by FLA members was down year-on-year by just under 20 per cent, according to the data.

The FLA, which represents Britain’s unsecured lenders, now fears that if the market continues to shrink access to credit will become more limited for consumers, causing some to turn to less reputable and unregulated lenders .

The body believes the collapse is due to a combination of new consumer credit regulation and the continued freeze in the wholesale lending markets, which it claims has put extra pressure on lenders at a time when they are "being called upon to help reinvigorate the economy".

Geraldine Kilkelly, the head of research at the FLA and chief economist, said: "These figures show the continued pressure on the consumer credit sector. They reinforce the need for the Government to take action to make wholesale credit available, including in the non-bank lending market."

"Without this, the lack of wholesale credit and the torrent of new regulation currently facing the industry pose the real risk that the size of the market will reduce even further, with serious implications for consumers - especially those who are most vulnerable."

"The Government should take full account of this risk in its forthcoming Consumer White Paper," she added.
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