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New EU lending restrictions making bank loans harder for consumers to secure

May 10, 2013 Simon Williams

The United Kingdom has been working to open up funding for consumers and small businesses alike. And although the Funding for Lending Scheme has been largely unsuccessful thus far, the government and Bank of England haven't stopped pumping money into the private sector to try to boost bank lending.

But a recent European Union initiative could put a damper on any progress the U.K. has made. The new rule aims to eliminate the the reckless lending habits of banks prior to the recession, with the hope of preventing the circumstances from ever happening again.

"This vote marks a milestone in our efforts to make the financial system more secure and transparent. It is good news for hundreds of millions of savers in Europe and across the world," said European Parliament President Martin Schulz, according to Express & Star. "The cap on bonuses is needed to change the culture of excessive risk-taking at many banks that endangers people's savings in the pursuit of short-term profit."

Despite outcries from a few countries, including the U.K., the law is expected to take effect at the start of 2014. For consumers at or near the subprime credit level, this may make it even harder to secure loans than it already is.

So what can residents struggling to get by do? They should look into alternative short term lending, which makes funding more readily available because these lenders use different scoring methods to determine whether or not to lend.

One of those measures includes Payment Reporting Builds Credit - when a lender takes past utilities payments and other financial factors into account in conjunction with traditional credit scores. This has opened up funding for a significant portion of the underbanked population that otherwise would not have an option to turn to.