Interest on legal aid loans not acceptable

It has been claimed that thousands of divorcing couples are being charged extortionate interest rates on their legal loans.

More and more couples are opting for a quickie separation through a DIY divorce - which could save time and money - and news that some divorcing couples are being charged eight per cent interest on legal aid loans could see these figures increase.

Couples who are going their separate ways though the courts can apply for legal help to assist them with fees. However, they are expected to pay back some, if not all, of the loan through any settlement they receive, the Telegraph reports.

If a partner receives a home in the settlement or they do not have the cash available to pay off the loan, the repayment can be put back but the interest they are charged is reported to be eight per cent.

Speaking to the newspaper, shadow justice minister Henry Bellingham, said: "It is totally unacceptable that at a time when interest rates have fallen to an historic low the government continues to charge a staggering eight per cent interest rate on the statutory charges attached to properties."

Earlier this month, the Bank of England's monetary policy committee voted to cut interest rates to an all-time low of one per cent. Consequently, the interest charged on such loans is 800 per cent more than the base rate.

Mr Bellingham stated that the government is pushing for banks and other financial firms to protect consumers during the recession but is "fleecing its own clients".

"This is rank hypocrisy and ministers should lower the statutory charge interest rate as soon as possible," he added.

Matthew Elliott, chief executive of the TaxPayers' Alliance, has called for an immediate cut and for the rate to be brought in line with the base rate. He says it is a classic example of the government not practicing what it preaches.

Meanwhile, marriage rates in England and Wales have fallen to the lowest level on record, according to the Office for National Statistics.

During 2007, marriages in the two countries fell for the third year in a row, down by 3.3 per cent to 231,450 in 2007, from 239,450 in 2006.

The trend was bucked between 2002 and 2004, but overall the graph has been following a southward trajectory in recent decades and this represents the lowest annual number of marriages registered in England and Wales since 1895 - when 228,204 couples tied the knot.

Although marriage rates are falling, both men and women in their late 20s had the highest divorce rates of all five-year age groups in 2007.

There were 26.6 divorces per 1,000 married men aged between 25 and 29, while there were 26.9 per 1,000 married women in the same age range.

This is more than twice the average divorce rate for all ages of 11.9 during 2007.

However, family lawyer Richard Phillips has told that he believes the recession will keep more couples together, as they are starting to think that they cannot afford to split up.

With the interest paid on legal aid so high, those who feel they simply have to split may find that a DIY divorce helps to keep the costs down during the downturn.

Written by Christopher Evans

Published on: February 13, 2009

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