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Salans cautious about RBS six month arrears policy

Salans is cautiously welcoming yesterday’s move by Royal Bank of Scotland to stave off possession until six months after a customer has fallen into arrears.

Law firm Salans Direct, which specialises in secured lending/asset recovery and conveyancing/remortgaging warns that unless there are innovative solutions developed to help borrowers manage their debt then extending the repossession processes could merely worsen the situation.

Salans argues that repossession is not an instant process and so by extending the start date by six months the repossession will not happen until nine months when even more debt will be leveled against the borrower.

Caroline Havers, partner at Salans Bromley, says: “I think that everyone applauds the motivation to stave off repossession but there needs to be a real understanding of what will genuinely address the situation.

“It should be recognised that a 6 month moratorium will only be of use if lenders can come up with some innovative way of tackling the arrears problem. It is challenging enough for lenders to get an account 3 months in arrears back on track and so it’s not difficult to realise that the challenge will increase should this time period be doubled. “

Havers says that early intervention to help borrowers restructure their loan is the key to staving off repossession and there is certainly an argument that will be made easier as monthly payments should be coming down.

She adds: “I think that once again the devil is in the detail and so we’d like to see the plans that sit behind this announcement otherwise there is a risk that we’re not only delaying the inevitable but could be making the borrowers’ situation even more desperate.”

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