High Street loan sharks

BANKS have been accused of 'binge lending' and abandoning vital checks which should protect customers from crushing levels of debt. Leaked documents have provided devastating evidence of reckless lending by one major bank which is symptomatic of the entire industry.

An internal audit at Lloyds TSB found that one in six large personal loans was made despite clear evidence that customers would struggle to make repayments.

It discovered that staff, under pressure to meet sales targets which boost their salaries, were manipulating paperwork and selling loans to people who could not afford them.

An astonishing 56% of cases did not have the required files to show proper financial checks had been carried out. All these failures are in direct contravention of the industry's Banking Code.

Among the victims of the High Street loan sharks were Wendy and Derek Dickerson, a couple on a meagre income who were encouraged to borrow £100,000 over 12 months. A branch manager badgered them to take on extra loans so he could earn bonus points that would increase his salary. When they were unable to make repayments, they were put under pressure to sell their Swansea home.

Such was the stress that 52-year-old Mrs Dickerson, a part-time care home nursing assistant, decided suicide was the only answer. She fled their home on Christmas Day but was saved by a passer-by who found her, sobbing, beside Swansea marina. It was then that the couple resolved to fight back.

The mother of two said: 'It has been an absolute nightmare and almost split us up. Last Christmas I just wanted to end it all. I hit rock bottom and couldn't see any way out. I feel so angry that we were taken advantage of.'

Eventually, a report from a bank official who investigated the case concluded: 'The Personal Account Manager responsible actively contacted the customers and encouraged them to borrow. I am both appalled and embarrassed.'

Even then, Lloyds TSB agreed to write off the couple's debt only after being contacted by a BBC team, led by Fiona Bruce, making a True Story documentary about the banks' hard sell, to be shown tonight.

Internal bank documents seen by the BBC make clear the Dickersons are not the only victims of a hard sell. Staff are under incredible pressure to push loans, credit cards and payment protection insurance policies. As a result, many do not make proper checks on whether customers can afford repayments. Some staff are selling loans and other financial products despite the fact they are not properly trained to do so.

The tactics have helped drive Britain's personal debt levels above the £1trillion figure, while bank profits have topped a record £30bn.

Families are being hit with punishing interest bills and penalty charges, backed up with menaces. They face threats from debt collection agencies, bankruptcy and the possibility of losing their homes.

Former banking industry executive Antony Elliot, of the Centre for Financial Innovation, said: 'Once, bankers could be compared to doctors in the way they attempted to provide finance to a customer in his or her best interest. Now, they are more like bartenders, knowingly serving alcohol to people who are already drunk.'

He called for a new law that would stop a bank or finance company pursuing repayments on a loan unless it could prove it had carried out proper advance checks on the customer's financial standing.

An internal audit by Lloyds TSB of bank branch and telephone sales of loans, credit cards and other products offers a devastating picture. It suggests staff were twisting the facts supplied by customers to ensure they qualified for mega-loans. This let them hit sales targets and improve their salaries.

It said: 'Too often it seems that income and expenditure statements are manipulated to achieve the best outcome for the adviser, with the needs of the customer and the bank secondary to this objective. It appears that the training in respect of 'responsible lending' has had little impact on staff behaviour and our advisers continue to be driven by a desire to maximise their NPV points.' NPV is Net Points Value, a measure of performance across various areas used to determine salary and bonuses.

A second report, on telephone sales, revealed that some managers believed the need to generate business and profits outweighed the need to put in proper safeguards.

Consumer borrowing expert Iain MacQueen-Sims said: 'Lloyds TSB can't be the only major financial institution with this sort of problem. We feel it is endemic throughout the industry. The entire culture is one of hard sell, with too little effort to protect the customer. You have incentivised selling of not only the loans, but also the associated insurance policies, which generate huge commissions for the banks.'

MacQueen-Sims, of the audit experts OmniCheK, said: 'Consumer credit needs to be brought under the control of the Financial Services Authority rather than left to self-regulation as it is at the moment.'

The Banking Code Standards Board promised an investigation. It said: 'We have obtained the bank's internal reports. It is fair to say there are issues we want to follow up.'

Real Story with Fiona Bruce is on BBC1 tonight, at 7.30pm.