Insolvencies and Repossessions Rise
Latest statistics for both personal insolvencies and mortgage repossessions make grim reading. Personal insolvencies rose by 48% and mortgage repossessions by 50% on the same time last year. Over 17,000 people were made insolvent in the third quarter of 2005, and 18,000 people lost their homes as a result of mortgage repossessions, with a further 12,000 people receiving 'suspended' court orders providing them with more time to pay.
Damon Gibbons, Chair of Debt on our Doorstep commented:
"The last few years have seen an exponential growth in lending. Many commentators, in Government and outside of it, have maintained that credit growth was not a problem as assets, in the form of house prices were also rising. But these figures indicate that continued high levels of credit lending - often irresponsible lending - is driving increasing numbers of people towards bankruptcy and homelessness. It has never been more urgent to ensure that lenders act responsibly and that assistance is made available for people facing repayment difficulties".
Debt on our Doorstep maintains that a duty should be placed on lenders to act 'responsibly' within the Consumer Credit Bill and that a levy should be placed on the lending industry to fund money advice services.
Debt on our Doorstep is also concerned that increasing numbers of loans - originally unsecured loans - are being secured on property as a result of the Government's reforms to County Court procedures. These have made it easier for lenders to acquire a charge on a borrowers' property when they fall into arrears. Borrowers are disadvantaged because they pay higher rates of interest for unsecured loans only to find that the lender can obtain security with ease at a later date. We call upon the Government to ensure that when a loan becomes secured in this way that a rebate is paid to the borrower to reflect the reduced risk to the lender that obtaining a charge provides, and that this should be backdated to the start of the agreement.
Damon Gibbons said: "Lenders shouldn't be allowed to have it both ways. If they want the security of a charge on property then they should have to reflect that reduction in risk by reducing the cost of the loan. At the moment they charge as if it is an unsecured loan only to obtain security later. The laws on this are distinctly unbalanced in their favour."
