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PPI: Use of charging order for small debts is concerning, says expert

The use of charging orders to secure relatively small debts is "concerning", according to an expert.

A charging order is a court order which lenders can apply for to turn an unsecured debt into one which is secured against the borrower's home. 

Although they are a legitimate method in which to secure and recoup unpaid debts, a recent investigation by the Office of Fair Trading (OFT) highlighted a number of issues with the industry.

The report showed that some lenders had been using charging orders to secure debts of under £600.

Chris Jenkins, creative director at Dallas Matthews, said that it is important that lenders judge each case on its "own merits" and take individual circumstances into account.

"I believe that some lenders are simply slapping charging orders on properties without assessing individual circumstances and it is this practice that the OFT are keen to stamp out," he said.

Mr Jenkins added that borrowers should talk to their lender if they are struggling to repay debts because this will "reflect much more favourably" on them if the case were to go to court.

Posted by Amir Hussain

Amir specialises in personal loans, consumer debt and debt management ADNFCR-2776-ID-800252531-ADNFCR

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