Reckless lending – Legislation initiative welcomed

The Financial Regulator’s annual report has called for new powers to oversee the worrying increase in mortgages being provided to sub prime borrowers who have defaulted on loans in the past.

Encouraging such borrowing is not the way to keep the economy going, but a recipe for financial disaster. The American economy has been in some trouble with the dollar falling recently over the vulnerability of its mortgage market.

Sub prime lenders specialise in providing mortgages and term loans to people who have trouble in getting loans from the main banks.

Such borrowers are frequently getting themselves into deeper trouble. There should be legislation not just to protect them from themselves, but to protect society as a whole from the dangers of reckless borrowing.

While there are no accurate figures available for sub prime lending, it still probably constitutes a mere fraction of the lending market, but there are indications that it is on the increases.

A number of new companies entered into this lending market last year. Some have engaged in aggressive marketing techniques, with intensive advertising on television.

The Financial Regulator’s initiative to obtain protective legislation should be warmly welcomed, because society as a whole needs to be protected from reckless lending enticing vulnerable people to incur debts that they cannot repay.