From The Times:
Banks and credit card companies are exploiting obscure legal powers to seize the homes of thousands of people who cannot pay their credit card bills. In some cases, people owing as little as £1,000 have been served with charging orders – the legal instrument enabling a creditor to order the sale of a property... Vince Cable, the Liberal Democrat Treasury spokesman, said: “No one should be allowed to lose their home simply because of a credit card debt. More needs to be done by the government to ensure that lenders simply do not act overzealously, and only take possession of properties as a last resort. The fact that banks can now kick people out of their homes for not keeping up with their unsecured debts is very worrying.”
Well boo-f***ing-hoo!
What sort of madness is this, that once you are a HomeOwner you become a sanctified, protected species, under no obligation to repay your credit card debts? What happened to this good old fashioned idea that you live within your means? Does being a HomeOwner somehow absolve you of your credit card sins?
I like Joe Garrick's comment best:
Why all the fuss? Here's a lesson that all people should learn: Credit isn't 'free' money. If you borrow money, then you must pay it back. Simple. Oh, and... read the small print. No sympathy.
Sunday, 26 October 2008
"Banks exploit legal loophole to seize homes"
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14 comments:
Methinks it's time for The Times and Mr Cable to do a little homework.
A charging order does not enable "a creditor to order the sale of a property".
If you owe money and the court gives judgment against you there are various ways that judgment can be enforced. One of these is a charging order which is an order made by the court (not by the creditor) and operates like a mortgage. If you do not pay the judgment the creditor can apply to the court for an order for sale, but it is the court not the creditor which decides whether to allow the judgment to be enforced by way of sale. Sale is not automatic, it is subject to the judge being persuaded that it an appropriate way to proceed.
In many instances judges refused to enforce charging orders because the remedy is out of proportion to the size of the judgment.
Bury your head in the sand and sale might well be ordered. Turn up at court, make an offer of so much per month and there's a good chance you can remain in Acacia Avenue for the rest of your natural.
TFB, exactly, you know that, I know that, it's commonsense, really. So why are The Times peddling this myth?
Yes I Agree Mark, but I also think the contract should rule.
If the loan is unsecured the loan should be regarded as unsecured and its the lenders risk which takes the hit in the first place for offering the loan.
It seems to me that one of the ways of getting back to sanity is for Risk to be made real again, with real money
PB, to clarify:
'Secured' is a technical term, which means that e.g. the bank or building society has a first charge against your house. No matter how much the borrower owes to anybody else, the bank/building society gets repaid first.
Conversely: 'unsecured' does not mean that there is no obligation to repay; what it means is that the lender is happy to be at the back of the creditors' queue in the event of non-payment and charges a much higher rate accordingly. And if you are seriously in arrears, the lender can (subject to lengthy and complicated legal stuff) can take your assets and sell them off. Whether that's a flat screen TV, a car or your house is neither here nor there.
TFB sums up what I was going to say on this - the courts would be quite right to refuse an order that is out of proportion to the original debt.
LR, unless they have changed the rules, you can have somebody declared bankrupt if they fail to respond to a statutory demand for an unpaid debt of more than £750.
Notwithstanding what TFB, passerby and you say in the comments this is another case of the banks and credit card companies expecting to have their cake and eat it.
Both have been happy to advertise unsecured loans at eye watering interest rates by inmplying that you home was safe, come what may.
TGS, agreed. It has long puzzled me that mortgage adverts always say "Your home may be at risk ..." but credit card adverts don't.
In truth, all adverts for any sort of loan should include the caveat "Everything you own may be at risk ...", just to spell it out to people who think that credit is free money with no obligation to repay.
I'm not sure I can agree fully with Mr Simpleton. It is nothing special about banks and credit card companies. If you owe someone money - whether it's a loan, or goods you haven't paid for, or you pranged his car and owe for repairs - he has to have a means of enforcing that obligation if you don't pay voluntarily.
The only way we have (apart from application of baseball bat to knee) is to take him to court and secure a judgment. But a judgment is a piece of paper, it means nothing unless it can be enforced. If you still fail to pay the court has various means of enforcing payment, of which a charging order is only one.
In practical terms whoever acts fastest gets money first. The only advantage banks and other large companies have is that they can afford to sue without worrying about legal costs and court fees whereas the butcher, baker and candlestick maker might not be in that position.
TFB,
I am with you, I don't believe people should think that they can take out a loan and the lender won't have recourse to whatever goods they have if they don't pay it off. I was just pointing out that CC companies and banks have played on people's gullibility in believing that they could take out irresponsible "unsecured" loans at eye very high interest rates.
Generally agreed with all the comments. But, there are problems with banks and debt and enforcement of payment. First of all the dice is loaded in favour of the lender. Even if you are in dispute they will use their muscle to try and deny you your legal rights. Plus they have been very careless indeed with their money, abandoning proper underwriting.
In relation to this there has been their scandalous penalty charging system that was only possible whilst most customers were ignorant of the law. Once the interweb permitted easy sharing among customers of the way to reclaim these the banks were found out. It is only by collusion with a Quango that the successful actions were stayed.
The point I am making (badly?) is that although I agree entirely that we all should pay our debts the UK banking industry has become very corrupt and self servibf by virtue of being a defacto cartel and has completely mucked up its business model.
A charging order doea not mean a creditor can force you to sell your house. It means that if you owe £20 grand, a charging order for £20 grand is made against your property. When you do sell it, then £20 grand has to go to the creditor before you see any equity cash from the sale yourself. The creditor cannot force the sale though.
C, exactly. But The Times saw an oppo for a hysterical headline and went for it.
Interesting, if not for you lot I would not have known the truth about these charging orders. I still find it weird that someone with any capital would take a loan and not expect that capital to be vulnerable in the event of default. Even more surprising is that politicians seem to accept this ignorance as acceptable and worthy of special circumstance rather than harsh reality.
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