Government asked to ensure bailed out banks don't repossess homes

Government asked to ensure bailed out banks don't repossess homes

Alistair Darling and Gordon Brown are being urged to ensure that banks accepting the taxpayer bail-out avoid repossessing homes and keep making credit available to low-income householders and small businesses.

The Liberal Democrat leader, Nick Clegg, has written to the prime minister urging him to demand that banks repossess family homes as a last resort and ban banks from withdrawing credit lines from small businesses.

The chancellor is also being advised to seek a commitment from banks on avoiding repossessions and making credit available to low-income households by the entrepreneur Clive Cowdery in his capacity as chairman of the charity Resolution Foundation.

In a letter to Darling, Cowdery also calls on banks to actively engage with customers to help them resolve any financial difficulties.

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"The next 12 months will be challenging for all, but the economic crisis is hitting households on low incomes the hardest. Banks play a pivotal role and I respectfully suggest that a social charter be attached to your offer of public support," Cowdery wrote.

Clegg has written to Brown seeking assurance that "banks only repossess family homes as an absolute last resort".

"Before a bank is granted a repossession order, they should first be required to prove that they have offered financial advice and investigated alternative solutions to repossession such as loan renegotiation or a shared equity scheme," said Clegg.

He also had ideas on curbing executive pay, including banning directors from receiving bonuses and paying bonuses to those outside the boardroom in shares.

"These reforms should be for the whole industry, not merely those banks who participate in the rescue scheme," said Clegg.

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