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Friday, 14 April 2017

FCA investigates 'irresponsible' car loans

The Financial Conduct Authority is investigating the car loans market, concerned that borrowers do not have to show that they can afford repayments. Basic credit checks may be supplemented by the sort of tests usually associated with mortgages, if the FCA considers it necessary. The amount being borrowed to finance new cars has trebled over the past eight years. The FCA's statement is in its business plan for 2017-18 - on page 74, if you are interested enough.

The Telegraph reports that the Bank of England is concerned that the trend could precipitate a financial crash if not brought under control. The paper also reports that an investigation performed by its journalists revealed that sales people were encouraging customers to spend their entire disposable income on 'pay monthly' deals for cars worth more than they earned in a year. Experia also warn that their data suggest that households with 'stressed' incomes account for a large part of the growth in 'pay monthly' car purchases.

In 2014 the FCA made affordability checks for mortgages more stringent, requiring more information about spending, amid fears that borrowers were over-stretching themselves to get on the housing ladder, and the same sort of checks might now be extended to car loans. The FCA notes that there may be 'a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance industry.'

See also Motor Trader's report, which in turn refers to an interesting posting on the Bank of England's "Bank Underground" blog (who'd have thought?) about the motor finance scene.

'via Blog this'

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