Bank watchdog investigates 'irresponsible' Lloyds lending

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The Independent Online

Consumer groups claimed last night Britain's biggest banks are systematically lending money to borrowers they know may be unable to repay the loans.

Consumer groups claimed last night Britain's biggest banks are systematically lending money to borrowers they know may be unable to repay the loans.

The warnings follow revelations broadcast on the BBC's Real Story programme, which yesterday accused Lloyds TSB sales advisers of breaking industry rules on lending to qualify for bonuses and commission.

Documents leaked to the BBC showed sales staff at Lloyds TSB, whose chief executive is Eric Daniels, had routinely failed to establish whether borrowers taking out loans would be able to keep up with repayments, a basic requirement of the Banking Code.

In one case featured on the programme, Lloyds TSB staff encouraged Wendy and Derek Dickerson, from Swansea, South Wales, to borrow £100,000 even though the couple had a joint annual income of only £5,000. The bank has since written off the debt.

The Banking Code Standards Board, the body that polices the voluntary code of conduct, has pledged to investigate the BBC's allegations.

However, the consumer group Which? said Lloyds TSB's rivals were breaking the rules in similar fashion, because staff were under increasing pressure to hit sales targets for loans, mortgages and other products.

Mike Naylor, the principal researcher at Which?, said: "If the BBC had investigated any large bank in this way, it would almost certainly have come up with similar findings. This is symptomatic of the industry and the way in which it makes its massive profits."

Debt advice charities also said they were concerned about irresponsible lending. John Fairhurst, the managing director of the debt advice service Payplan, said: "This is a fairly loosely regulated market that is very competitive. Banks either lend people this money or lose market share to rivals."

A spokesperson for Lloyds TSB said the bank was committed to lending responsibly. She said: "We have stringent rules in place. If a scenario arises whereby an individual operates outside those rules ... we take it seriously and conduct a thorough investigation."

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