70% of personal loans without proof of income

Some £20.9 billion was lent last year by UK banks in personal loans without checking people's income.

Research by uSwitch reveals 70 per cent of loan applicants were not asked to prove how much they earned, and 45 per cent of borrowers took out loans from lenders other than their own banks, meaning the lender had even less information about their client.

Some 15 per cent were not even asked their incomes on application forms.

This level of reckless lending has in part led to UK banks facing over £17 billion worth of debt write-offs.

Mike Naylor, personal finance expert at uSwitch, said: “With more than 7,716 loan repayments being missed every day and record write-offs, you might think lenders would have learnt their lesson, but the potential profits have clearly been too good to resist."

The new Banking Code does press lenders to be more responsible – looking at information from credit reference agencies and at least the bank's own credit scoring techniques – but Mr Naylor claims this does not go far enough and more people could be encouraged in borrowing more than they can afford.

"While the credit crunch has forced lenders to tighten up their lending criteria, these latest amendments to the Banking Code do not go far enough to help promote responsible lending in all cases," he said.

"Further credit checks could be costly and no doubt the bill would be passed back to consumers.

"However, it could be a small price to pay if it helps to curb the rapid growth of debt which is spiralling out of control. We cannot ignore the fact that consumers have a responsibility to borrow sensibly, but lenders really aren’t helping."