Banking code investigates credit practices

Some of the UK's largest finance providers could soon be facing clampdowns on the way they handle customers' credit ratings.

Banks, building societies and specialist lenders could face bans on lending to certain customers if they are found to be incorrectly handling customers at risk of bankruptcy.

The measures are being imposed in an attempt to ensure that institutions are not blindly pushing people into greater debt or disregarding risky credit ratings when awarding consolidation loans.

Finance industry watchdog the Banking Code Standards last year launched a probe into the factors that may be contributing to the UK's £1 trillion mountain of personal debt.

The inquiry has focussed on 12 of the country's biggest banks and credit card companies and the way that they assess each customer's credit rating when dealing with a request for an unsecured loan or credit card.

It is also believed to be concerned about banks' using bonuses and prizes to encourage their staff to sell loans and credit cards.

The board has announced that it is working with the banks to find a compromise solution to the problems it has found.

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