High fees for mortgage debt advice
Some mortgage lenders are reported to be charging high fees for advising borrowers who are in debt, when independent advice can be obtained free from charities.
The Citizens’ Advice Bureau (CAB) is strongly opposed to the practice, which can drive people deeper into debt when high charges are applied.
The CAB is urging banks and other lenders to advise customers with credit card debt or mortgage arrears to seek free and independent advice.
This kind of advice is impartial and will look at a person’s finances overall, while a counsellor appointed by a lender may only focus of the debt in hand.
Halifax, the UK’s largest mortgage lender charges £100 for debt counselling, while Nationwide charges £95, Lloyds TSB £94 and Abbey £80.
With Northern Rock the charge is variable and GMAC-RFC is also in the £100 category.
Barclays and RBS/ Natwest refer borrowers to debt charities and Accord Mortgages, which forms part of Yorkshire Building Society, offers debt counselling services at no charge.
Lenders offering counselling services that charge a fee are pointing out that the service is not compulsory and is often only offered as a last resort.
The importance of debt counselling cannot be underestimated in the current climate.
The number of homes repossessed by lenders has increased by 30% over the past 12 months, with 14,000 repossessions taking place in the six months to the end of June.
Lenders can also charge high fees for repossessions, for example Northern Rock charges £1,400 to repossess a property, change the locks, insure it and then sell it.