Charging Orders – the latest threat to indebted homeowners
The Citizens Advice Bureau (CAB) claims that lenders are increasingly threatening customers in England and Wales with charging orders, in attempts to intimidate debtors into making unaffordable repayments.
A charging order is a means of securing an unsecured loan against equity in the debtor’s property.
In a new report entitled “Out of order” the charity says evidence from CAB caseloads shows that creditors are also increasingly asking courts to enforce charging orders by granting an order for sale, which allows a lender to recover the debt by forcing the sale of the debtor’s home.
According to the CAB, the law around charging orders is currently unclear and “some creditors are testing the legislation around their use and obtaining charging orders with increasing ease”.
In addition, the report points out that “there is currently no minimum financial threshold for obtaining a charging order, leaving people at risk of losing their homes over potentially very small sums of money”.
The Office of Fair Trading is undertaking a review of charging orders but the CAB is now calling on the Ministry of Justice to look at the law.
CAB chief executive David Harker says: “It is vital that people who are doing their best to repay their debts should be protected from further debt collection or enforcement action and from enforcement related costs that are disproportionate to the size of the debt.”
He adds: “The current law on charging orders urgently needs reviewing and appropriate protection put in place.”