Lenders charge for advice on dealing with debt

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by Kay Murchie

Borrowers struggling with excessive fees are now being charged for advice by mortgage lenders and critics have blamed lenders for driving those in financial difficulty even further into debt. Borrowers are already suffering with interest rate hikes.

However, independent advice is free from charities and those struggling with repayments are advised to contact charities such as the Citizens Advice Bureau. The advice is neutral and can help you manage all your finances.

Halifax, the UK’s largest lender, charges £100 for debt advice, as does GMAC-RFC. Lloyds TSB charges £94, Abbey £80 and Nationwide charges £95 whereas charges by Northern Rock are variable.

Lenders say their counselling services are not obligatory and they are only offered as a last resort. However, there are some lenders out there who are more understanding. Accord Mortgages, part of Yorkshire Building Society, charge nothing and Barclays and RBS/Natwest refer borrowers to debt charities.

A spokesperson for Moneysupermarket.com, the price comparison site, pointed out that those struggling to make repayments are particularly vulnerable and lenders must treat their customers fairly. Some customers may be unaware that some lenders charge for every call and letter.

Borrowers affected by unreasonable fees for going into arrears should ask for compensation like the thousands of people affected by unfair bank charges have. If you think the fees you have been charged are higher than administrative costs and the lender refuse to refund you, complain to the Financial Ombudsman Service.

Finally, repossessions are rocketing due to high arrears, with 14,000 taking place in the six months to June 2007.