Member Article

RBS and NatWest warned over charging orders

The Royal Bank of Scotland (RBS) and NatWest will be subject to new regulations issued over charging orders by the Office of Fair Trading (OFT).

Both banks were warned against demanding a charging order from borrowers who have failed to pay back their unsecured debts.

Charging orders allowed the banks to change unsecure debt into secured debt, by transferring it onto an asset, such as property.

After an investigation into these types of charges, which allow the bank to recover debts on the sale of the assets, OFT said there were “problems with the way RBS and NatWest were using them”, although they were a legitimate way to recoup debts.

According to OFT, the banks lacked a consideration of borrowers’ personal financial circumstances and the proportionality of how they approached charges before referring to the courts, resulting in the changes announced on Friday.

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.”

NatWest and RBS said in a statement: “We are committed to helping customers who find themselves in financial difficulty.

“We changed the thresholds for using charging orders ourselves in 2008. The cases reviewed by the OFT preceded these changes. We use charging orders only as a last resort.”

This was posted in Bdaily's Members' News section by Miranda Dobson .