Lenders threaten to take homes over credit card debt

Lenders are increasingly threatening to repossess the homes of credit card and personal loan borrowers, a charity has warned.

Citizens Advice said there has been a 722 per cent increase in the number of charging orders since 2000, as lenders turn unsecured debt from loans and credit cards into secured debts on the customer's home.

Once the debt is secured, the lender can then ask a court to force a sale of the house.

Citizens Advice chief executive, David Harker, said: "Some creditors are using the court process as a tactic to intimidate vulnerable debtors into paying unaffordable amounts.

"The current law on charging orders urgently needs reviewing and appropriate protection put in place."

As the law on charging orders is unclear, and there is no minimum amount for obtaining an order, the charity is concerned that lenders are using the threat of repossession to force borrowers into paying back the debt at an unaffordable rate.

"We certainly do see lenders placing charging orders on properties quite often," said Joseph Surtees, policy and research officer for the Consumer Credit Counselling Service (CCCS).

"Obviously it is difficult for debtors and we do feel sometimes leniency could be shown."

A Wiltshire Citizens Advice Bureau (CAB) reported a couple had been threatened with charging order proceedings for a credit card debt totalling just £690, while a single parent in south-east Wales was told she would have to clear her £2,000 personal loan in just six months by a debt collection firm or an order would be placed on her house.

Citizens Advice said it welcomes the Office of Fair Trading (OFT) review into the use of charging orders but is now calling on the Ministry of Justice to look at the law and restrict access to enforcement when debtors are doing all they can.

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