Loan companies that are not part of the banking system should be brought into line with the banking industry’s code on responsible lending to avoid people who can’t afford loans from becoming overstretched and unable to pay, argues the British Bankers’ Association (BBA).

There are now hundreds of companies within the lending market offering loan deals to customers of every financial circumstances, but the BBA says the fact that thev are not being regulated in the same way as banks is an issue that needs to be addressed.

In a letter to the Shadow Treasury Minister Mark Hoban MP, BBA Chief Executive Angela Knight says that where banks adhere to the Banking Code and thoroughly study a potential customer’s circumstances using internal controls and credit reference agencies, increasing numbers of firms are extending credit to borrowers who do not meet their bank’s criteria, and the consequences of this, she says the “could be serious.”

“When a gap opens between what a borrower wants and what a bank wants to lend, too often an irresponsible lender steps in,” says Ms Kinght.

“Only around 63 per cent of unsecured borrowing now comes from the banks. There are certainly responsible lenders among the rest, but how is a consumer to know who they are or what their lending rules are?”

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