The Financial Services Authority has suggested new rules to protect mortgage borrowers who get into arrears. The FSA says it wants to ensure that those borrowers are treated fairly, especially ones who have borrowed from specialist lenders. In particular the FSA says it wants to ensure that repossession is a last resort and that borrowers in arrears are not levied unfair charges.
"Today's proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly," said Lesley Titcomb of the FSA.
"Lenders need to be in no doubt of their obligations to customers who fall behind with payments and must realise that such circumstances are not an opportunity to create further profits," she added.
Earlier in the year, the FSA's own research identified the aggressive treatment by some lenders of their borrowers in arrears as a particular problem.
"In many cases, it found a high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules," the FSA said.
So the main points of the FSA’s latest consultation are that:
• firms must not add early repayment charges onto any arrears charges, or charge interest on those charges
• firms must not levy a monthly arrears charge if the firm and the customer have agreed a plan to repay the arrears
• firms must consider all options for borrowers and use repossession as a last resort
• payments by customers in financial difficulties must go to clearing arrears first, with arrears charges being paid off later
• all telephone calls and records about customers arrears must be kept for three years.
Nick Pearson from debt solutions experts Baines and Ernst said that his firm “warmly welcomes” the FSA’s new proposals. He added “Baines and Ernst have previously highlighted our concerns about the disproportionate mortgage arrears fees added by some lenders when borrowers get into difficulty, indeed we were one of the first organisations to raise this issue when we highlighted our concerns on BBC Radio 4’s “Moneybox so we are delighted that the FSA is taking this issue