Sub-prime lender 'closes doors to new business'

05/06/2009

Europe's largest bank has taken the decision to close much of the branch network of its subprime division.

Beneficial Finance, which offered credit to a broader range of people than parent company HSBC, is to lose many of its high street outlets.
Around 100 branches are for the chop and the remaining 25 will be closed for new business, as the firm restructures in the credit crunch.
The deteriorating economic conditions were blamed by HSBC for the closures.

Financial website Moneysupermarket.com expressed concern over the news.

It said in a statement: "Often called the underserved, there are fewer and fewer places for subprime and near-prime borrowers to turn, with Provident Financial now the only provider willing to lend to these groups.

"My biggest fear is that subprime borrowers may be forced to borrow from ‘loan sharks', or turn to pay day loans if all other traditional sources of credit dry up."

Kevin Still, EuroDebt director, added: "The withdrawal of specialist lenders in the sub-prime market has forced many consumers to look at more expensive and more risky forms of credit, including loan sharks, pawnbrokers, pay day loans and log book loans. It is not only the rate of interest on some of these credit agreements, but also the detrimental terms in the small print if a consumer misses payments or defaults on these agreements.

"Many of these providers aren't bound by the same codes of practice that members of the British Banking Association and the Finance & Leasing Association follow. EuroDebt often has to deal with these types of agreements when setting up a Debt Management Plan that aren't recorded on a client's credit file. We would always encourage people looking to borrow more to service existing less expensive credit commitments to take professional advice."

Tags; Debt Management and Banking, Credit Card Lifestyle,

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