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Tesco ‘jumbo loans’ flout runaway credit warning

Tesco ‘jumbo loans’ flout runaway credit warning as BoE considers rules to rein in banks’ lending splurge

Tesco Bank has spearheaded a consumer borrowing binge over the past year, offering ‘jumbo loans’ – just as the Bank of England warns against excessive lending.

Tesco’s personal loan arm grew 19.9 per cent after it began allowing customers to borrow up to £35,000 without putting up property – or other assets – as collateral.

The Bank of England has warned that offering larger unsecured loans represents a potentially dangerous loosening of the rules on consumer borrowing.

The bank’s total unsecured lending grew almost 15 per cent to £7.9billion last year

Former Pensions Minister Ros Altmann said: ‘There are a lot of people taking on debt they probably can’t afford, who haven’t got a strategy for paying it back if interest rates rise or if they lose their job.’

The bank’s total unsecured lending, comprising credit cards and personal loans, grew almost 15 per cent from £6.9billion to £7.9billion last year, while the market grew 10 per cent.

The bank said it had decided to increase its business in the personal lending market where it had previously been extremely conservative.

‘We made a decision to broaden the scope of what we were offering,’ it said. ‘It’s all still within our risk appetite. We came from a very conservative position.

‘We launched larger loans of £25,001 to £35,000 in response to strong customer demand. As with all our loans, approval is subject to credit assessment and policy, including a robust affordability assessment.’ 

It would not say how many customers had taken out the larger loans.

The Bank of England’s Financial Policy Committee said this month that it was concerned by breakneck borrowing.

It said: ‘An easing in credit supply conditions appeared to have contributed to the growth in consumer credit, with intense competition in some segments of the market.’

The Prudential Regulation Authority is currently conducting a review of underwriting standards.