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This Is How The Bank Will Cover Themselves

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Surely this is wrong. The banks do get this both ways. But this way it is not regulated.

Debt counselling charities are warning their work is being undermined by a new trend by lenders to secure borrowing through the courts.

The number of "charging orders" issued in county courts is running at 35,000 a year, three times what it was five years ago, BBC Radio 4's Money Box has learned.

Advisers say the practice is becoming so common that the way loans and credit cards are being marketed should change to include mortgage-style warnings that your home may be at risk if you miss repayments.

They also say that if the number of charging orders being issued continues to rise then the government and regulators should be concerned.

Having a charging order put on your home means that when the property is sold and the mortgage cleared, any money left over will go to pay the outstanding borrowing.

Risk premium

Jane Garret, from charity Christians against Poverty, said she believes it is becoming standard practice for some high street banks to issue charging orders, even when the debt is small.

She cited a case she dealt with where the borrower had begun to clear their loan: "Six months after the instalments were started, the creditor goes for a charge, and when we enquire 'Why have you changed from accepting this to going for a charge?', [the bank] said it is our policy".

Citizens Advice is another major organisation that is unhappy about this growing practice.

Principal Policy Officer Peter Tutton said the banks stand to profit because, despite the security, they are still charging the higher interest rate of the unsecured debt.

"Lenders are kind of getting it both ways, they are getting the risk premium off the borrower, but they are getting the security of the charge and that seems unfair."

'Last resort'

Lloyds TSB, Halifax Bank of Scotland, Nationwide, Northern Rock, Abbey, Alliance and Leicester, and Marks and Spencer Money, all said they use charging orders to turn unsecured debt into borrowing secured against the home.

Charging orders secure debt against your home

Most refused to say how many charging orders they issue each year, but nearly all said they only use them as a last resort.

Malcolm Hurlston of the Consumer Credit Counselling Service told the programme that if the practice increases further, the authorities should be concerned.

"If this trend were to continue at the current rate," he said, "then there is no doubt about it, it's something that ought to attract the attention of the Department of Trade and Industry or the Financial Services Authority."

The financial regulator, the Financial Services Authority, told the programme that as it does not regulate unsecured debt, it was a matter for the Department of Trade and Industry (DTI).

The DTI said it has spent £45m training debt advisers, and that other government departments are working to prevent so many debt cases coming to court.

BBC Radio 4's Money Box will be broadcast on Saturday, 8 October, 2005, at 1204 BST.

The programme will be repeated on Sunday, 9 October, 2005, at 2102 BST

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Surely this is wrong. The banks do get this both ways. But this way it is not regulated.

Wrong? No I don't think so, if you owe money, built up CCJ's, still can't pay.. and own a house, why not?

Not regulated? Well it has to go via the county courts, as defined by The Charging Orders Act 1979.

BTW government should be concerned... most councils they use them if your behind on your council tax :P

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  • 301 Brexit, House prices and Summer 2020

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