THE FINANCIAL Services Authority (FSA) has launched an inquiry into the sharp rise in unsecured consumer lending by banks and other financial institutions.
The FSA's chairman, Howard Davies, told a parliamentary committee yesterday that the FSA will investigate loans, including credit cards, after noticing a 50 per cent rise in unsecured lending amounting to pounds 115bn in the UK in the last three years.
The FSA's managing director, Michael Foot, said: "We're not party poopers and we're not there to second guess lenders, but we want to see that the right prudential measures are in place."
The action comes as banks have found themselves under increasing pressure from low-cost lenders. Big institutions have also expanded in the high-margin area of credit cards to compensate for less profitable secured lending.
Separately, yesterday, the Office for Fair Trading warned lenders they could be open to prosecution if they failed to stick to guidelines when advertising annual percentage rates. The OFT criticised adverts that, for instance, highlight a low APR that is only available if insurance is also taken out on the loan, for failing to ensure the typical APR rate is prominent.
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