From The Sunday Times
October 26, 2008

Banks exploit legal loophole to seize homes

Robert Watts

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.

The practice has emerged days after Yvette Cooper, chief secretary to the Treasury, called on banks to do more to allow people to keep their homes.

According to the Ministry of Justice, 97,026 charging orders were granted by courts in England and Wales last year, a tenfold increase since 2000.

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They allow financial institutions to order the sale of a property to pay off unsecured debts on credit cards, personal loans, store cards and car finance. Some will have been used only to threaten the debtor, or to levy a surcharge on the mortgage to recoup the debts.

Nationwide, the building society, and Northern Rock, which was nationalised earlier this year, are among the most aggressive in using the court orders.

Mark Sands, head of insolvency at KPMG, the accountancy firm, said: “The power of a charging order can come as a horrible shock to someone. When they took out the loan or the credit card, they were almost certainly not told that their home was at risk if they failed to keep up with repayments.