Money Grouse: Borrowers in arrears face extra payments

BRISTOL & West Building Society has started charging an administration fee of pounds 11 a month to some borrowers who are behind with mortgage payments.

This has infuriated one customer, a reader from Reading, who says: 'My account is in arrears. I missed two full monthly payments in mid-1991 and some reduced payments thereafter. I have been paying an agreed sum, which includes a substantial arrears payment, for 10 months.'

All lenders have been pressing borrowers over the past two years to discuss their problems and agree repayment schedules. So, to penalise those who have done so seems unfair.

The society denies it is being unduly hard on people who have made a genuine attempt to cope with their arrears. It says the pounds 11 fee is necessary to cover the costs involved in administering mortgages that are in arrears.

The charges are being levied from this month, although the society says they will be totalled up and added to loans next March and the monthly payments adjusted then.

Borrowers who are now making full monthly payments on their loans may be able to avoid the charges by having any backlog of past arrears added to their outstanding loans.

Charges on arrears are not uncommon among other societies, although most claim to be flexible. Nationwide, for example, may charge 1.2 per cent a month on the total amount of arrears once an account is behind by three months or more.

Bradford & Bingley has a range of charges, but for borrowers paying the standard 7.99 per cent variable mortgage rate it adds 0.65 per cent for each pounds 100 of arrears. Cheltenham & Gloucester charges interest on accumulating arrears at the same rate as the person is paying for the main mortgage.

The Building Societies Association said charges like this were a commercial matter. A spokeswoman thought they would be allowed for by a clause in the mortgage deed or the society's rules. If not, the borrower might be able to dispute them.

Bristol & West said its rules did allow for such charges.

Write to Money Grouse, The Independent, 40 City Road, London EC1Y 2DB. Include a daytime telephone number. Do not send SAEs or original documents.