Warning over charging orders

The use of charging orders by lenders to recover relatively small debts is a matter of alarm because of the small amount of money often involved, it has been noted.

Creative director at digital marketing agency Dallas Matthews, Chris Jenkins, said it was “concerning” that lenders were often chasing people in this fashion for debts of as little as £600, since much of this money would be lost to them via court charges and other costs.

He stated: “My advice to borrowers would be to always talk to your lender, even if your ‘debt’ is relatively small. This will reflect much more favourably on your case if the matter ever does go to court.”

Mr Jenkins also called on borrowers to be more understanding and try to assess individual circumstances more.

Those who are facing the possible prospect of charging orders from their lenders may be able to seek an individual voluntary arrangement (IVA) to find a better way of approaching the situation and avoiding court action.

Although an IVA can only be available to those with debts of around £15,000 or more, this may consist of a number of small loans or credit card bills added together.

Mr Jenkins made his comments in the wake of action taken by the Office of Fair Trading (OFT) this week over concerns about the moves by four lenders – Alliance and Leicester, American Express, HFC Bank and Welcome Financial Services – to issue charging orders for small debts.

It has imposed a requirement on the group to address its concerns about the way it has set about enforcing debts.

By Joe White