Sub-prime lenders slated by CAB
May 23, 2008
Sub-prime lenders in the UK have come under fire from the Citizen’s Advice Bureau, with officials from the CAB accusing sub-prime lenders of dishing out loans to consumers that cannot afford them, and then getting aggressive when the borrower naturally falls behind with repayments. In response the Council of Mortgage Lenders has stated that the CAB is being ’simplistic’ and ’sensationalist’.
Sub-prime lenders are those that specialise in offering loans to people with poor credit, the self employed, and no proof of income. The CAB stated in a report: “Dubious advice from brokers, irresponsible lending decisions and aggressive arrears management by sub-prime lenders are driving the current increase in mortgage arrears, court action and repossessions.”
Officials from the Council of Mortgage Lenders have stated: “The vast majority of mortgage customers receive a high level of help and care from lenders of all kinds if they fall into difficulties, in accordance with the rules set out by the Financial Services Authority. The allegation that they default too quickly to court action is an assertion that is not borne out by the typical practices and processes of specialist lenders.”
However, the CAB said: “Our research suggests that many aspiring home owners have been mis-sold unsuitable and costly home loans that are doomed to fail from the start.” He added: “Many sub-prime lenders are flouting the rules on responsible lending by granting loans when it’s clear the borrower will not be able to afford to repay it from the very outset, then getting tough immediately things go wrong.”
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