With increasing numbers of people struggling to pay their unsecured debts including personal loans and credit cards, lenders are using a little known clause in consumer credit laws to chase payments
from debtors.
The Independent reports that the rise in the use of ‘attachment of earnings orders’ has risen steeply
over the last year.
Attachment of Earnings Orders up by 30 per cent in last year
The legal information service Sweet and Maxwell has found that the use of ‘attachment of earnings’
orders has risen by almost one third in the past twelve months. The orders, which allow creditors
and lenders to take money directly from debtors’ salaries as soon as they are paid, is a little known
clause in consumer credit legislation although the use is on the rise.
Sweet and Maxwell said that there were 15,339 applications for attachment of earnings orders in
the third quarter of 2010 (the most recent period for which figures are available) up from 11,800
applications in the first quarter of 2010.
The Independent reports that ‘the news may anger regulators as in 2009 the Financial Services
Authority criticised firms’ use of the arcane orders, particularly when it came to mortgage debt and
chasing arrears.
‘The FSA recommended that lenders should offer borrowers other options, such as temporary
lending holidays or changing the repayment terms before embarking on legal action to recover their
debts.’
Attachment of Earnings Orders more effective than other types of debt recovery
Claire Sandbrook, a Sweet and Maxwell spokesperson, said: “Attachment of earnings orders are
becoming more popular because other options available to creditors to recover debt have become
less effective during the downturn.
“The creditor needs to know who the debtor’s employer is, but it is quite easy to find that
information, particularly if the creditor is a bank or credit card company, which is often the case.”
