Protection added on arrears and rentback

1 July 2010 | By Chris Salih

The FSA has brought in new rules to provide better protection for vulnerable consumers in arrears or entering into sale and rentback contracts.
Firms will not be allowed to apply a monthly arrears charge where an agreement is already in place for the borrower to repay those arrears.

Payments from borrowers in financial difficulty must first be allocated to clearing missed monthly mortgage payments, with arrears charges being repaid later. The regulator also wants firms to consider all other options for borrowers, making repossession a last resort.

Firms must record all arrears-handling phone calls and keep records for three years.

Sale and rentback customers get new rules including a five-year minimum security of tenure. Risks must be signposted to the customer through

FSA literature and during the sales process. There will be a ban on exploitative advertising and high-pressure sales. Firms will not be allowed to use emotive terms such as “fast sale”, “mortgage rescue” and “cash quickly” in promotional literature.

The rules ban cold-calling and promotional leaflets through letterboxes and introduce a 14-day cooling-off period to allow costumers to make better decisions on sale and rentback.

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