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FSA pledges to get tough on mortgage phoenixing

The FSA has vowed to crack down on mortgage firms that close down and immediately resurrect themselves in an attempt to avoid debts.

Speaking at the Mortgage Business Expo in London last week, FSA director of small firms Lesley Titcomb said the regulator has seen “phoenixing rearing its ugly head in the mortgage market”.

She said: “The same directors appear at the new company, often at the same address, with the same customers and staff and even a similar name in some cases. The only thing that does not move is the liabilities.

“The last time it happened, we saw off the problem by taking strong action and I want to stress that we will do it again. Some firms are trying to walk away from commercial debt, some from misselling claims. When they pass on the liabilities to the others through the FSCS they cost good firms money. We want to nip this in the bud.

“What we want to see are firms willing to work with us in protecting the consumer. We cannot stop firms becoming insolvent but we can take steps to minimise the impact.”

The regulator is asking all directors to sign undertakings to honour the liabilities of claims on any previous business. It is also encouraging firms to “ringfence” funds to be held by the departing firm to meet any further liabilities and avoid future claims.

Association of Mortgage Intermediaries director of policy Andrew Strange says: “We welcome the FSA’s strong stance on phoenix firms and are pleased it is committed to addressing this issue.”

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