Money experts are expressing alarm over practices at a leading UK lender after a BBC investigation revealed evidence it is causing distress.

First National Bank is owned by Abbey National and has more than 4 million customers.

It specialises in lending money for home improvements and furnishings.

Although, the bank's approach is not illegal, debt advisors are concerned the methods employed are grossly unfair.

Tim Lett of the National Association of Citizen's Advice Bureau said:

"If people knew more about First National's way of approaching customers in severe financial difficulty then far fewer people would be prepared to take out loans with them"

Charging orders

The concern centres on two controversial practices.

The first is the issuing of charging orders. This essentially turns unsecured loans into debts secured against the borrowers home.

A charging order can be issued when a borrower defaults on payments after a County Court Judgement.

First National appears to demand payment of the entire loan rather than agreeing to affordable instalments.

This inevitably means many borrowers instantly default.

Dave McNevin defaulted and paid a harsh price

In 2001, almost a quarter of all charging orders in England and Wales were made by First National.

The National Association of Citizens Advice Bureau says First National's practice of seeking an order in virtually any case where it is possible is not used by any other lender and causes extreme distress to those already suffering hardship.

Balooning debts

The problem does not end with charging orders.

First National also continues to add interest to borrowers' accounts even after a County Court Judgement has already set the amount they can afford to repay.

They can do this because of a term that appears in most loan contracts. But only First National and one other lender actually enforce it.

Inefficient administration on First National's part means many borrowers are unaware of the rocketing debt the bank has in their name.

"There are some IT issues here which we are waiting for some fixes for"

First National's Nicola Chard

Confusingly, although the interest appears on loan statements, the company claims it does not expect customers to pay it all back.

When Inside Money confronted First National, Board Member Nicola Chard admitted this might cause confusion but blamed it on the banks computer systems:

"The difficulty we have is our systems actually keep the account... there are some IT technology issues here which we are waiting for some fixes for, so the statement will say one thing and we actually ask for a lower amount."

The bank is promising to review their documentation and says customers will only have to pay back what the original loan would have cost them.

No consolation

But this will come as little consolation to Dave and Joan McNevin, who have been preparing to sell the home they lived in for 23 years.

They borrowed �1,100 pounds from First National in 1991.

When ill health meant Mr McNevin defaulted on his repayments, First National took him to court where it was decided he would pay �10 a month.

But unknown to Mr McNevin, interest continued to be added to his account at the rate of 28% for the next 10 years.

"What has made me so mad is why they left it so long to inform me the debt was going up and up"

First National customer Dave McNevin

So when Mr McNevin asked for a statement in December 2001, believing he owed around �300, he was horrified to find his debt had grown to almost �8000 pounds.

By July it had reached �8500.

Mr McNevin was stunned: "What has made me so mad is why they left it so long to inform me the debt was going up and up"

Mr McNevin then contacted his local Citizens Advice Bureau and was horrified to discover there was also a charging order against his home.

The only way the McNevins could clear the debt was the sell their home

Vortex of debt

The bank's practices have been questioned before.

The Office of Fair Trading took them to court arguing the clause allowing the charging of interest after judgement was unfair and sucked people into a "vortex of debt".

The case ended in the House of Lords last year. First National won but the judges expressed concern about the effect the clause had on debtors.

To make matters worse, many judges do not consider that debtors may continue to be charged interest when making judgements and setting payments.

Inside Money asked the Consumer Affairs Minister Melanie Johnson if she was concerned by the bank's strategies.

The Minister said the Department of Trade and Industry is looking at the OFT ruling as part of their review into the Consumer Credit Act.

"We will try to make it work better from the consumer's point of view because it is entirely right to say that it is not working as well as it should"