Bank ‘offered unaffordable loans’

Lloyds TSB has been accused of breaking the banking code of practice by giving loans to people who cannot afford them.

The BBC programme Real Story has found that one south Wales couple on a low income was lent £100,000 by the bank.

The Banking Code Standards Board has said it is investigating the actions of the bank.

Lloyds TSB says it is committed to being a responsible lender and has introduced measures that go beyond the requirements of the banking code.

Real Story was given an internal Lloyds TSB document detailing a review of 185 loans of more than £15,000.

In more than half of the cases the bank did not fill in the right paperwork to show the loan was affordable, and in some cases the loan was found not to be affordable.

In one case uncovered by Real Story, David Dickerson and his wife Wendy, from Swansea, were given a loans totalling £100,000 by Lloyds TSB. Mr Dickerson is unwell and on benefits, while Mrs Dickerson earns just £5,000 a year.

Lloyds TSB said it had now offered to write off the Dickerson’s debt.

In a statement the bank said: “Lloyds TSB is committed to being a responsible lender. It is clearly not in our interests to lend money to people who cannot afford to pay us back.

“As a result of our focus on responsible lending, we have introduced a number of industry leading initiatives which go above and beyond the minimum requirements of the Banking Code and exceed the standards of many of our competitors.”

The banking code is a voluntary code which sets standards of good practice for financial institutions to follow when they are dealing with customers.

“The banking code says that before we lend you money or increase the limit on your overdraft or credit card we will assess whether we feel you will be able to repay,” Seymour Fortescue chief executive of the Banking Code Standards Board told the BBC.

“Banks and credit card companies are required to look at people’s income and financial commitments of any borrowing, information from credit reference agencies and things like credit scoring as well.

“As soon as I heard that Lloyds TSB had commissioned some internal reports I asked to see those,” Mr Fortescue said.

“We have now been investigating those reports and we have disciplinary powers and if necessary we will take disciplinary action.”

However, he did add that he thought Lloyds TSB deserved “some credit for commissioning these internal reports to see what was going on”.