Banks have started to probe customers about their ability to deal with the financial fallout caused by coronavirus, as concern over consumer debt grows.
The impact of Covid-19 is expected to be long-lasting and millions of people have requested payment holidays from their bank since the crisis began. There are fears that many borrowers may be unable to repay credit card, loans and mortgages as jobs are lost and savings dwindle.
One bank, NatWest, has started to ask credit card applicants whether they expect their income will drop because of coronavirus during the next five years.
Homeowners have also been asked to sign documents at the end of the mortgage process which confirm that their income is as previously declared. This is to prevent banks offering loans to customers who have been furloughed or lost income since their initial application was made.
Before the crisis the City watchdog, the Financial Conduct Authority, had mandated that firms ask whether customers can afford loan repayments both now and in the future. However with consumer finances in a perilous state, banks are more inquisitive than ever before.
Andrew Hagger of MoneyComms, a personal financial analyst, said banks had tightened their rules in light of the pandemic.
“It’s no surprise that lenders, including credit card providers, have increased the level of detail they require from borrowers applying for new or increased credit limits,” he said.
“With many people suffering a drop in income and/or facing the real possibility of losing their job when the furlough scheme winds down, lenders are understandably far more cautious.”
Mr Hagger said the number of interest-free credit cards on the market had dwindled in the last three months. He added: “This trend will continue in the coming months as the recession starts to bite and unemployment soars.”
NatWest declined to comment.