The regulator issued a set of measures intended to strengthen existing rules on arrears handling, as flagged in the Mortgage Market Review.
Key proposals include outlawing monthly arrears charges where firm and customer have already established a repayment plan, banning the addition of early repayment charges to arrears charges and obliging firms to record all arrears handling telephone calls.
The FSA also stressed that repossessions should always be a last resort option. The suggested measures will also mean all mortgage advisers and those who arrange non-advised sales will be individually accountable to the FSA and need to demonstrate they are fit and proper for their role.
Lesley Titcomb, FSA director responsible for the mortgage sector, said: “The proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly. 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.”
The Council of Mortgage Lenders (CML) broadly agreed with the suggestions, but warned that any plans to extend the approved persons regime could be disproportionately costly for lenders.
Michael Coogan, CML director general, said: “The number of sales advisers identified by the FSA appears lower than we would expect, suggesting it may be underestimating the cost of implementing the proposal both for the regulator and firms.”
Citizens Advice welcomed the announcement and claimed the strengthening of existing rules would help protect vulnerable homeowners from avoidable homelessness.
Sue Edwards, head of consumer policy at Citizens Advice, said: “Although recent government packages for supporting homeowners were making a difference, in a third of recorded cases, lenders had failed to comply with new rules which require them only to take court action as a last resort after pursuing other options.”
