Charging Order Reprimand for RBS and Natwest

January 22, 2013

Charlotte PearceThe Royal Bank of Scotland plc (RBS) and National Westminster Bank plc (Natwest) have had requirement imposed on them by the Office of Fair Trading (OFT) over concerns about the way they are enforcing some customers debts using charging orders.

A charging order turns an unsecured debt into a secured debt, this is done through the court by placing a ‘charge’ on the debtors property. If the property was to be sold this charge and any prior ranking charges would be settled from the proceeds of the sale. Once a charging order has been obtained in extreme cases an application could be made to the court requesting sale of the debtors property so the creditor can recoup their outstanding debt.

The OFT have found problems with the way RBS and Natwest have been using charging orders. The OFT’s concerns include an apparent failure by the banks to consider customers financial circumstances and the proportionality of the approach before asking the court to put a charging order in place.

The banks were seen to be using charging orders to secure relatively small amounts, sometimes below £5000. They have not been taking in to account a customer’s efforts to repay the debt using debt management or other methods.

David Fisher, OFT Director of Consumer Credit, said:

‘Lenders are entitled to use charging orders but they must do so proportionately and not to secure relatively small amounts of debt.

‘Where we consider the use of charging orders to be unfair or oppressive we will take action to protect consumers.’

The imposed changes: