It reported that, in the three months to January, business dropped by 26% to £64m, compared to the same period of the previous year.
A spokesperson for FLA said that the drop was the result of lenders facing difficulty in accessing new funding.
She said: “The market is fairly subdued and lending in the mortgage market has been dropping each year because of the lack of funding.
“New lenders are desperately needed to bring in more funding and help revive the market. Until this happens, we forecast that lending levels for the secured loans market will be more or less the same by the end of 2011.”
Nevertheless, the FLA figures showed that total consumer credit lending rose by 5% in January, the first rise since August last year.
Direct unsecured loans increased for the third consecutive month, up 27% in January 2011 on the previous year, while credit cards and car finance increased 3% and 16% respectively.
However, with consumer confidence low, store card spending shrank 18% and store installment credit was down by 11% compared with January 2010.
Fiona Hoyle, head of consumer finance at FLA said: “In the last 12 months our members provided over £50bn of consumer credit, but consumer confidence remains low.
“A sustained economic recovery is dependent on a competitive market that creates more choice for consumers. It is important that any changes to the regulatory regime for credit markets, under a new Financial Conduct Authority, do not impede this growth.”