Banks and credit card companies are exploiting obscure legal powers to seize the homes of thousands of people who cannot pay their credit card bills.

In some cases, people owing as little as £1,000 have been served with charging orders – the legal instrument enabling a creditor to order the sale of a property.

The practice has emerged days after Yvette Cooper, chief secretary to the Treasury, called on banks to do more to allow people to keep their homes.

According to the Ministry of Justice, 97,026 charging orders were granted by courts in England and Wales last year, a tenfold increase since 2000.

They allow financial institutions to order the sale of a property to pay off unsecured debts on credit cards, personal loans, store cards and car finance. Some will have been used only to threaten the debtor, or to levy a surcharge on the mortgage to recoup the debts.

Nationwide, the building society, and Northern Rock, which was nationalised earlier this year, are among the most aggressive in using the court orders.

Mark Sands, head of insolvency at KPMG, the accountancy firm, said: “The power of a charging order can come as a horrible shock to someone. When they took out the loan or the credit card, they were almost certainly not told that their home was at risk if they failed to keep up with repayments.”

The rate at which the courts have granted charging orders has increased sharply in the past two months, according to Citizens Advice, National Debt-line and the Consumer Credit Counselling Service. Last week a homeowner posted a message on a website saying a credit card company had launched a charging order against him for a debt of £1,000.

From next year banks will be given further arbitrary powers because they will no longer need to secure a county court judgment against a defaulting debtor. They will be able to move directly to seek a charging order after two or three months of missed payments.

Vince Cable, the Liberal Democrat Treasury spokesman, said: “No one should be allowed to lose their home simply because of a credit card debt. More needs to be done by the government to ensure that lenders simply do not act overzealously, and only take possession of properties as a last resort. The fact that banks can now kick people out of their homes for not keeping up with their unsecured debts is very worrying.”

Alex McDermott, social policy officer at Citizens Advice, said the government had presided over a hidden scandal, because homes repossessed in this way did not appear in the official statistics issued by the Council for Mortgage Lenders.

The Consumer Credit Counselling Service said Northern Rock and Nationwide were particularly aggressive.

Northern Rock confirmed it used charging orders where customers had missed payments on unsecured loans, saying: “Any application for a charging order on an unsecured loan is in strict accordance with the Consumer Credit Act.”

Northern Rock and Nationwide declined to discuss how many homes they had forced to be sold.

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Read the full article at GetOutOfDebt.org, click here: Banks in the UK Force The Sale of Homes Over Credit Card Debts

Ariel

“Dear Steve,

I have 11 credit cards with zero balances and want to close them and keep paying out my other 5 open credit cards. if I close these 11 will it hurt my credit score or should I close them regardless?

Ariel”

The Answer:

Dear Ariel,

Your question brings up the greater issue of do we need to live by our credit score? The credit score formula is not designed to show who is a better personal money manager. It is designed to allow creditors to easily spot who is going to be the less risky and a more profitable customer.

If you decided that you were only going to live on a cash basis and spend what you could afford to, your credit score would suffer and go down the tubes. There needs to be credit activity to score you on. A classic mistake many people make is to have a run of bad credit and then stop using credit. All that does is leaves you with a history of bad credit and nothing new to bring your score up.

A large percentage of your credit score is based on the history of an account. The longer you’ve held an account, the more it counts. The only real exception is that store cards don’t really pull their own weight on the credit score. They’ll hurt you if you are late but not really help you if things are good. Why? Because creditors know that almost anyone can qualify for a store card. If you can fog a mirror, you can get a store card. They are not good indicators of credit worthiness. Most people get suckered into the ‘save now’ offers for opening a card but that is nothing more than an inducement for you to open a card. You’ll end up paying many time more than the discount you got in interest when you carry a balance on the store card.

I would close the store cards, all of them. You don’t need them, they carry a higher rate of interest and the stores will accept your major credit card for purchases.

Of the remaining cards, I would suggest that you get a copy of your consolidated credit report that I use and look to see which have been open the longest. Keep the three that have the longest history and close the rest. Three cards is plenty to use. I don’t even care what the interest rate is because the goal here is to get you to pay the balance off in full each month on those remaining cards. If you pay the balances off in full, guess what, no interest charge.

Make sense?

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: I Have Eleven Cards I Want to Close Some But Should I? – Ariel

Store cards in good times are a good source of profit with their exceptionally high interest rates but in down times they can be an anchor around profits.

Not only are store cards generally easier to acquire by people with lesser credit but they are often the first to go unpaid when there isn’t enough money to spread around.

Target Chief Financial Officer Douglas Scovanner, on a recent conference call, said credit cards are the company’s “second-largest challenge.”

In the past year, the net charge-off rate on retail cards has jumped 2.4 percentage points to 8.1 percent. The charge-off rate on general-purpose cards has risen only 1.7 percentage points to 6.08 percent, according to industry newsletter Nilson Report. [Read More]

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Read the full article at GetOutOfDebt.org, click here: More Bad News For Nordstrom and Target Credit Cards

Charlotte wrote to me at GetOutOfDebt.org and asked for free advice and help, which I gladly give. You can write me using the forms on the site.

“Steve,

I owe nearly $20,000 on a loan, a bunch of credit cards and some store cards as well. I’m 27 and I still live with my parents because I just can’t get ahead.

I can’t pay my bills, live on my own, or have my own life until I can get ride of this debt.

This must be my fault because I don’t work hard enough. My 22 hour a week job is a joy and I don’t want to quit but I want to make more money.

I’ve worked full time before and the thought of going back to a full time job I will hate makes me so depressed.

You see I want to be a writer and I spend a lot of time trying to become one.

I want to do something I love, but to get there I have to invest the time and find a way to be able to afford to do what I want to do. Some days feel hopeless, most days actually.”

Dear Charlotte,

Thank you for writing me.

Rather than look at your situation as hopeless, it actually looks like there is some hope.

Sure, being 27 and living at home with the parents is a downer. It can feel oppressive and that you have no life of your own. That is actually your reality at the moment, but rather than look at it as a curse, your sentence or punishment, why not just look at it as your cross to bear right now on your path to a better future.

The vast majority of writers make little to no money. We write because we love to write. Some are elegant, talented and poetic writers. Others are like me. LOL

Just the other day I was telling someone that the reason I had some jobs that I hated, was not the attitude of the job, it was my attitude. I did not want to be there because I certainly deserved to be some place else having more fun. That was silly thinking. I was not hired for my enjoyment, I was hired to do whatever my employer wanted me to do during my alloted time.

“You want coffee?”

“With cream and sugar?”, should have been my response.

Finding something that you love to do is a rare experience for many. Instead they hate their jobs, have nothing joyful to pursue, are dissatisfied with their families and spouse and just all around nasty bags of bones and flesh.

That doesn’t have to be you. You don’t have to give up your dreams to pursue a different future. If anything, maybe just a bit of rearranging is in order.

My suggestion would be to rearrange your life by getting a full time job, adopt a mental attitude that this job is helping you to achieve your dreams, move out, get a roommate, focus on saving money and write, write, write.

There is plenty of time to write if it is your love and passion. I wrote a book in three days on a trip once. If you are passionate about writing and you’ve got something to say, you will be able to write, even after a tough 40 work week.

The pivotal moment for you is if these uncomfortable facets of your current life become excuses that hold you back rather than hurdles to overcome. I say make them hurdles that you’ll cross.

Until you do begin to achieve some of your goals, like moving out or writing professionally it would not surprise me at all if you made little to no progress of reducing your debt. Your debt will ebb and flow with your emotional outlook on your life does. When you think it is bleak you will most likely unconsciously spend to cheer yourself up. And when you are feeling better about the future you will lament about the size of your debt and it will feel hopeless.

The debt is the debt. Stop going further into debt, tread water till you can make some life changes and develop a path that will lead you to a better outlook and that will lead you to success. When you do make these changes it will be easy to face tomorrow and do what you have to do to get out of debt and look forward to your real and authentic life.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: Charlotte Writes In, “I’m Desperate To Get Out of Debt”