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‘Debt counsellors are collectors in disguise’

Lenders are accused of setting payment priorities which can end up with repossession

Whistleblowers have accused mortgage lenders of fuelling a repossession crisis by aggressively chasing arrears instead of helping borrowers with debt problems.

Two debt counsellors and a broker have lifted the lid on alleged unscrupulous practices that see lenders sending debt counsellors to chase missing mortgage payments.

The debt counsellors are said to typically advise clients to prioritise mortgage payments to such an extent that payments on loans and credit cards are dramatically reduced. Unsecured lenders are then said to be applying for a charge on the property that could lead to repossession.

Debt Solutions managing director Howard Wilson, who used to be a debt counsellor for BM Solutions and GMAC, says: “Unsecured lenders are taking debtors to court and securing charges on the property. Counsellors do not care about residual debt.”

The use of the phrase “counsellor” has also been critic- ised for disguising what could amount to a collection service as a help session that can cost the customer £120 per visit.

Which? principal researcher Teresa Fritz says: “There has to be prioritisation but lenders must show sympathy. I would only take debt advice independently. If they are calling themselves counsellors, that is deceitful.”

Many debt counsellors are not permitted by their employer to recommend alternative mortgage arrangements such as switching to interest-only, reducing payments, payment holiday or remortgaging, which could help a client get their finances in order.

MCOB rule 13.3.2 states that lenders must make “reasonable” efforts to reach an agreement with a customer over any payment shortfall.

Another unnamed debt counsellor says: “I am effectively paid to be a debt collector and I am no longer a debt counsellor. Nine out of 10 people are unaware that they can get a remortgage.”

Lender Kensington has been criticised by broker Ashtons Financial Services consultant Tim Christian for pressurising his client into paying off a mortgage without giving any help or offering other options.

Christian says: “The aver- age client will not have a clue and brokers should warn their clients.”

Kensington spokesman Alex Hammond says: “These are debt counsellors, not debt advisers. They can talk about but not give advice on the prioritisation of payments.”

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