LONDON, United Kingdom (Reuters):

United Kingdom lenders have dished out billions of pounds worth of loans in the past six months without checking whether consumers could afford to repay them, figures showed yesterday.

A total £11.9 billion was advanced without lenders undertaking even the most basic checks on borrowers' income and outgoings, according to price comparison service www.uSwitch.com.

Its research, undertaken by YouGov among almost 4,500 adults, found that 70 per cent of loan applicants were not asked for proof of income and 83 per cent were not asked to prove monthly outgoings.

Lenders were also prepared to grant huge loans compared to income.

Seven applicants were given loans of more than 125 per cent of their salary, five people received loans of 100 to 125 per cent of income and 14 were given loans of 75 to 100 per cent of salary.

Banks have recently come under fire for lending too freely, as the number of consumers struggling to repay debts has soared.

Although the rate at which consumers take on new debt has fallen, personal insolvencies have risen sharply as consumers finally succumb to unsustainable debt repayments.

Failure

The uSwitch service said its findings highlighted the failure of the Banking Code Standards Board to strengthen existing lending practices and boost consumer protection.

Changes to the Banking Code made six months ago required lenders to carry out more robust checks on the financial circumstances of prospective borrowers.

"This is yet another example, if one were needed, that the Banking Code is not working in its current form and that income and affordability checks need to be made compulsory," said Nick White, director of financial services at uSwitch.com.

"With one person in the U.K. falling victim to insolvency every minute of the working day, you might think that the lenders would have learnt their lesson after record write-offs on bad debts - but the profits to be made are obviously too good to resist."

Insolvencies in England and Wales leapt an annual 55.4 per cent to hit a record 27,644 in the three months to September, according to figures from the Department of Trade and Industry.

Bad debts among lenders have also risen, fuelled by the emergence and popularity of individual voluntary arrangements (IVAs) agreements with creditors to make reduced payments towards debts.

Write-offs by U.K. banks on unsecured lending amounted to £3.6 billion last year, Bank of England figures show - equivalent to some 20 per cent of banks' total net profits.

In response to the uSwitch research, HSBC said it required personal loan customers to have a current account with the bank, into which they had to pay at least £500 per month.

"This enables us to see, first hand, the customer's regular income and outgoings and review the track record of their account before any new lending is granted," it said in a statement.