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Consumer credit market declines

Consumer credit market declines

Category: Money

Updated: 30/09/2009
First Published: 30/09/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The credit sector appears to be stabilising but consumers face having fewer choices when looking to borrow money, figures published by the Finance and Leasing Association (FLA) suggest.

New business written by members of the FLA, which provide secured and unsecured loans, credit and store cards, and motor finance, fell by 17 per cent in July, compared with the same month last year, suggesting a stabilisation in the sector.

In total, approximately £4.37 billion was lent to consumers by its members.

In the three months to July, new customer finance business was 16 per cent lower than it was during the same period in 2008 – similar to the rates reported in May and June.

However, annual comparisons are still some £11 billion down on last year, with store instalment credit the only area to rise.

The secured loan sector has diminished in particular, with lending in this market down by 83 per cent in the last three months.

There is also the fear that pressures to decrease the size of the sector could lead to the introduction of regulation that may mean consumers actually face less choice when looking to borrow money, which could lead desperate consumers turning to unauthorised lenders.

The FLA's Russell Hamblin Boone told "The industry urgently needs a period of stability to allow changes already made to bed down.

"Over regulation will exacerbate the problems of an already shrinking market. It will result in more financial exclusion, as access to credit is reduced by more risk-averse lenders and restriction in wholesale funding.

"We have anecdotal evidence that suggests more people are turning to loan sharks in the current climate."

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