The Anonymous Widower

Responsible Lending

If I walk up the Kingsland Road in Dalston, the road is crawling with money shops, pay day loan companies.pawnbrokers and all of the other dodgy lenders that proliferate these days.

So when someone who works in finance, said there was a thing called The Lending Code, I thought I’d take a look.

It is the sort of worthy document produced by regulators and the like that is manna from heaven to all those dodgy lenders down the Kingsland Road and others who shark loans with large amounts of advertising, sponsorships of Premiership football teams and sometimes with door-to-door salesmen with big boots.

I always remember a story told by a respectable finance guy, who said that when the government restricted the length of time you could take out a loan for and if it was for something like a car, then you could only lend a percentage, it was a licence for finance companies to literally print money. If everybody sticks to the Lending Code, then the costs to borrowers will go up, banks will make higher profits and many will be effectively removed from the list of borrowers. A lot will remove themselves because they won’t be bothered to read the paperwork.

When I was in Greece, I thought I might stay a bit longer and in that case, I would have needed more cash, as Greece is very much a cash society.  So I used the Internet to login to my Nationwide account and increase the overdraft.  In the end, I came home and haven’t used the limit.  But would the Lending Code with all its provisions on overdrafts make such a simple transaction more difficult?

What is really needed is a plain English Lending Code. When I was at ICI, we used to write and distribute flyers about the jobs we did with our computer. They were successful in getting new business and this was because they were read.  And why were they read?  Because they were a single sheet of A4 paper.

So The Lending Code as implimented by a bank say, should be a series of web or A4 pages related to each area of lending.  If it can’t fit on one sheet, then The Lending Code is wrong.

Only in that way could we have a code that could be understood by the man or woman on the Dalston Omnibus!  These are the people we need to protect from the lenders.  Not those like me that sit in the middle of the lending market and only use it, when they have a well-thought out need.

I like Zopa and I’ve met a few of their borrowers, who seem very happy with the way Zopa does business. In a way, you can almost class Zopa as a group of people coming together to lend money to others.  Isn’t that supposed to be what building societies and credit unions were and are about?

In a way though, Zopa, although it is unregulated by the FSA, acts like a mainstream lender, in that it does proper identity and credit checks and gets tough with those that default on their payments. I think, that it might be unique in that it allows borrowers to chsnge their payment day or repay the loan early without penalties, when perhaps their cicumstances change.  Both these features, should be in The Lending Code.  I can’t even find the word early in The Lending Code.

So yet again the bureaucrats are creating work for themselves in trying to protect the unprotectable.

April 13, 2011 - Posted by | Business, Finance | , ,

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