Buy to let lenders warn of cash grab for missed payments

Buy to let lenders warn of cash grab for missed payments

10:16 AM, 22nd July 2011, About 13 years ago

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"Setting off could create problems for investors"

Landlords should separate their savings and current accounts from banks where they hold buy to let mortgages, loans or credit cards after threats to snatch cash without permission from a lender.

Nationwide, the UK’s biggest building society, has written to mortgage customers threatening to implement ‘setting off’ powers that lets lenders take cash from a borrower’s savings or current accounts to pay loans installments if payments are missed.

The lender points out that accounts in subsidiary brands are also targets for cash raids that can leaving balances short for paying bills and direct debits.

Setting off can cost borrowers double in charges as they face penalties for the missed payment plus those from other creditors who they thought were paid before the cash was grabbed.

For the Nationwide, that means landlords with borrowings from buy to let subsidiary The Mortgage Works or UCB Homeloans could have cash transferred without their knowledge or permission from Nationwide, Derbyshire, Cheshire or Dunfermline building society accounts.

Nationwide is not the only lender who can use the setting off rules – for instance, following the credit crisis Lloyds Banking Group, swallowed the Halifax, Bank of Scotland, Lloyds TSB, Birmingham Midshires, Black Horse, Cheltenham & Gloucester and Intelligent Finance.

The move to implement these powers shows that banks and building societies have little loyalty for customers and may throw them into unexpected financial difficulties to protect their own positions.

Buy to let landlords can simply avoid the problem by switching personal accounts and savings away from their mortgage lenders to a rival.

The issue also affects the self-employed and small businesses.

Una Farrell, of debt advice charity Consumer Credit Counselling Service, said: “We advise people to have their current or savings account with a different provider to their credit card, loan or mortgage.

‘It gives you more control if you get into financial difficulty and avoids the nasty shock of money being grabbed from your account without your permission.”

Other banks and building societies were swallowed by Santander and the Yorkshire Building Society during the credit crisis.

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