Consumer credit: where did it all go wrong?

Evidence on both sides of the Atlantic suggests more and more consumers are hovering at the brink of insolvency. But why did lenders let their lending criteria become so lax?

Financiers have, over a long period of improving economic conditions, dramatically loosened their criteria. In the early stages loans are prudently arranged. However, strict credit criteria limited their business growth. It was only a matter of time before one of them, in an endeavour to widen his business, became more lenient and so the loan books grew. Lowering the barrier to entry seemed to put no pressure on the loan book whilst significantly increasing profits it caught on fast.

Consumer credit: consequences of looser lending criteria

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