Consumer borrowing falls again

Consumer borrowing continued to fall in September as people remained cautious about taking on more debt, figures showed today.

Total lending by members of the Finance & Leasing Association fell to £4.58 billion during the month, 6% less than September 2009.

All areas of lending were lower than a year ago, apart from car finance which rose by 2% to £1.49 billion.

Borrowing for high street spending saw the biggest dive, with store instalment credit dropping by 23% to £155 million, while lending through store cards was 22% lower at £160 million.

There was also an 8% slide in the amount of money people borrowed on credit cards during the month, although at £2.25 billion this remained the largest area of lending.

FLA members advanced just £24 million through second mortgages, under which people borrow money secured against their property, 11% down on a year earlier, while borrowing through unsecured loans fell by 5% to £205 million.

Fiona Hoyle, FLA head of consumer finance, said: "The new figures show that consumers continue to take a cautious approach to spending, with a decline in the amount of credit granted almost across the board."

The Government is currently consulting on new rules for the sector, including caps on the interest rates that can be charged on credit and store cards, and a seven-day waiting period after people take out a credit agreement before it becomes active.

Ms Hoyle said: "We have explained to MPs and to the Government that any new regulation must be well-targeted or it risks entrenching the problem of shrinking markets and must not inhibit the contribution of consumer spending to the economic recovery."