Consumers target debts rather than spend
The consumer credit market remained subdued in July as people continued to focus on paying down their debts, figures showed today.
A total of £4.06 billion was advanced to consumers in July by members of the Finance & Leasing Association, 8% less than in the same month of 2009.
There were declines in all areas of credit, apart from car finance, which rose by 6% year-on-year to £927 million, the group said.
The biggest drop was to lending through store cards and store instalment credit, with both of these areas seeing a 24% decline.
There was also a 17% fall in the amount advanced through unsecured loans, with this dropping to £195 million, while demand for second mortgages dropped by 11% to £25 million.
Credit card borrowing dipped by 9% year-on-year, although at £2.51 billion, it remained the largest area of consumer credit.
The figures come as the British Bankers' Association said outstanding unsecured debt owed to its members remained broadly unchanged in August for the second month running, as repayments by consumers matched new advances.
Fiona Hoyle, head of consumer finance at the FLA, said: "The consumer credit market remains subdued.
"But for consumer credit lenders, the remaining months in 2010 will be devoted to implementing new regulations delivering important new rights for consumers."
The new regulations include providing consumers with clearer information on credit products, including how much they will cost, as well as new rules on responsible lending.
People with credit cards and store cards will also be able to have more control over their credit limit and be given more options when lenders impose interest rate rises.
The FLA is also updating its own lending code to take account of these changes.