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FSA cracks down on arrears management

The FSA has announced measures to help borrowers in arrears and confirmed that all mortgage advisers and those arranging non-advised sales will be individually accountable to the regulator.

The measures follow on from last October’s Mortgage Market Review and work carried out by the FSA which uncovered high levels of consumer detriment especially in the specialist lending sector.

In a consultation paper published today, the regulator says it will require firms not to add early repayment charges on arrears charges and interest levied on those charges.

Firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears, and they must record all arrears handling telephone calls and keep all records for three years.   

The FSA will convert its forbearance guidance into rules, so that firms must consider all options for borrowers, making repossessions the last resort. Measures also confirm that payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments.

The FSA estimates the new measures will cost firms a total of £590,000 in one-off costs and between £485,000 and £1.65m in ongoing costs.

The paper also confirms that all mortgage advisers and those who arrange non-advised sales will be individually accountable to the FSA, under the approved persons regime.

FSA director responsible for the mortgage sector Lesley Titcomb says: “Today’s 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.”  


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. The monthly arrears fee of a flat rate of £40, announced by Skipton last week (conveniently at the same time as their SVR hike), looks to be close to breaching the FSA’s requirements here. Anyone from the Skipton care to comment?

  2. Central Trust charge £60 late payment fee, I wonder is that in breach of FSA rules

  3. Incompetent Regulators Awards Team 26th January 2010 at 9:51 am

    Soemthing else the FSA haven’t even considered once again. If a client goes into arrears it costs the lenders more, so who’s going to pay for this then.

    Yet another knee kerk reaction from the jerks team!

  4. Does anyone spot an inconsistency here?

    The banks get £200billion on a plate when they fall into arrears, a consumer gets charged even more at the very time they cannot afford to pay.

    It’s like a reverse Robin Hood, stealing from the poor to give to the rich (the shareholders/members).

    Isn’t this system just great?

  5. The damage has already been done, the rest of us have to get the proverbial mop out yet again.

  6. I do like the way that the FSA always say that “repossession should be the last resort”. It is!!! Lenders don’t want houses – they want people to pay them interest on the money they’ve lent them. That’s how they make a profit.
    Another example of the lack of understanding of how the mortgage market really works and evidence that the direction of regulation is based on hearsay and unresearched “gut feeling”. Brokers have been feeling the brunt of this for years (they’re all criminals, you know!) and now it’s the lenders’ turn.

  7. Hello, the FSA can charge us £250 if we are late in responding to a request, yet again double standards. If you live in a glass house you should not throw stones!

  8. There is a large cost to Lenders for running highly trained teams of arrears ‘consultants’! Having been in the business through the last downturn I can confirm that the current staff are no longer mere collectors but work extensively with borrowers to find solutions. The last contributors’ comment about ‘not wanting to take possession’ is spot on.
    So, we have borrowers not paying – no interest being collected and staff being paid to fact find and offer solutions but it seems that the Lender is to be penalised for trying to recoup the costs. This is all most of them want to do – charges are, on the whole, not punitive but realistic!

  9. Frank Stephen Adams 26th January 2010 at 2:18 pm

    Once again authority- in this case, the buffoons in Canary Wharf, come to the rescue of the people who do not want to take responsibility for their problems. Do not get me wrong I am the first to hammer lenders for being injust but this is sending out the wrong signals- “Do not pay your mortgage!” This is what this will encourage and once again the poor adviser is getting put under the cosh. Why not line up advisers at the local pub or in a sports stadium and short them!

  10. Same stupidity, different day from the FSA.Do they have a contest running amongst their staff as to who can dream up the most brainless idea.? Answers on a post card please!!!

  11. I am confused by some of the comments above. I am under the impression that the article says that the lenders cannot charge monthly arrears charges – which is right. If they charge monthly fees of £40 or £60 the consumer will never get out of the hole they are in therefore will get their home repossessed anyway as the arrars will build up instead of get paid off. FSA have made a not bad rule here – its about time the Banks started to pay for the mess they created in the first place.

    Secondly it is about time that the FSA made all mortgage brokers accountable to them. We might get rid of the rest of the cowboys still plaguing this market.

  12. One wonders how the FSA’s programme to repay its £14m overdraft is progressing. Are they making steady headway or will things be derailed by the payment of another £20m in bonuses?

    No matter, the banks won’t lean on them unduly ~ they’re all neighbours and drinking buddies. Funny how it’s one set of rules for the FSA and quite another for the rest of us.

  13. Southern Pacific mortgages charge an arrears management fee of £115 per month. This is charged on the account and added to the arrears figure if a payment is missed or if a payment is made but there is a shortfall. However, the fee continues to be charged if for example you miss a payment in January but then pay in full and on time in February… you are still charged the £115 in February. You have to pay the fee if you are behind on an arrangment. Some borrowers may not be able to catch on an arrangement and will nend up getting stuck having £115 added to their arrears each month. How can they be expected to catch up? Is scandelous and i have had a judge made that exact comment about the way arrears management fees are charged…

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