FSA investigating five more firms over arrears
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The Finanical Services Authoirty has revealed that it is investigating a further five firms over their handling of arrears.
Jon Pain, managing director for supervision at the FSA, made the annoucement this morning at the Council of Mortgage Lenders’ annual conference in London.
In June the FSA announced that it found continued weaknesses in the way specialist lending firms and third party administrators were handling mortgage arrears and repossessions and that four firms had been placed on enforcement.
And then at the end of October the FSA revealed that it had fined GMAC-RFC £2.8m over poor arrears management, the biggest ever mortgage related fine.
Pain told delegates at the CML conference today: “Our enforcement team is still investigating five more firms about similar poor treatment of customers in arrears.
“The industry should not be deluded about the strength of our commitment in this area.”
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Readers' comments (9)
John Toogood | 13 Nov 2009 11:16 am
As a debt management adviser I am amazed at the number of lenders who are totally inflexible when it comes to helping a client overcome severe financial difficulties and this applies at least as much to main stream lenders as non conforming. As an example The Woolwich refused to switch a 35 year old couple on to interest only as a temporary measure because they had taken a payment holiday of 3 months. This family are in difficulty due to income reductions and may now have to face the possibility of repossession.
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Ian Rogers | 13 Nov 2009 12:04 pm
John, Debt management isnt the answer either, the answer lies with the FSA in authorising new lenders into the sub prime market, debt management is the next endowment scandal, it is an area that i wouldnt recommend any of my clients too.
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Stephen Yates | 13 Nov 2009 12:23 pm
Ethical Debt Management can be the answer - Debt Management that sees clients paying a couple of hundred pounds per month against contractual monthly payments of £800 or more is not an answer. Some of these people will just be paying for the rest of their lives and will still owe money. The Debt Management Industry needs to get better but John is right - the lenders need to get better at arrears handling and if my experience is anything to go by this is both secured and unsecured lenders. I dont agree Debt Management is a scandal in waiting but I do agree the industry does have a lot to do to improve!
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Dougie McGill | 13 Nov 2009 12:43 pm
Debt management is certainly not a good long term solutinbut for certain clients it is a good stop gap measure until hopefully in future some new mortgage products are available.
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Keith Curtis | 13 Nov 2009 1:28 pm
I too concur with John Toogood and the attitude of the Woolwich or Barclays, whichever you prefer. I have customers who came off of a tracker mortgage to SVR smack bang in the middle of this crisis. All previous payments over 2 years and previous properties had been met. With an interest hike of nearly 2.00% surprise surprise the customers started to struggle. Repeated discussions with the lender failed to reach any agreement and now they face repossession. All because the lender would not offer another product they would give to a new borrower! Surely it would be best to keep the borrowers you have than incur the start up costs for a new one? It certainly was in my day as a lender. It seems to me that there is no flexibility in thinking with these cut throat lenders, and Barclays actions around the world and their reputation of courting and then withdrawing at the last minute from banking or capital services which subsequently causes the failure of the organisation, cue Lehmans, is an attitude that they are happy to employ to the borrower too.
Their total inflexibility has placed this couple in a very serious financial position. This couple worked in financial services all their life and were caught up in the total devastation of the mortgage market, along with thousands of others. By approaching this problem in the way the Woolwich have, could effectively mean this couple will never be able to work in the mortgage market ever again. 100's of customers down the years have been pushed to the Woolwich by this couple, to say they are bitter does not even get close. This lender has failed to reflect the deep troubles the country is in.
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Anonymous | 13 Nov 2009 1:32 pm
For your information one of the reasons lenders may appear reluctant to allow concessions such as interest only periods is that the FSA are now insisting that whilst previously such an agreed "arrangement" did not have to be recorded as arrears now the unpaid capital element of a temporary interest only concession must be recorded as arrears and remain as such on the account. Arrears require additional capital and so this strains capital requirements at at a time when the FSA is insisting that capital should be increased. Thus the many responsible and sympathetic lenders who would have willinlgy adopted this route in the past now have to think long and hard about doing so in the future for fear of regulatory admonishment. One part of the FSA therefore demands sympathetic action whilst another part is making it harder to do so. Note also that permanent arrangements for interest only mortgages do not attract an "arrears" label, even if there wasn't even a repayment vehicle in place!
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Anonymous | 13 Nov 2009 4:32 pm
What is the difference in capital adequacy between agreeing somebody paying interest only, and no agreement and no payment.
I have doubts about the claims management industry but equally lenders need do more with people facing problems.
I am aware that when people have taken their case up with a director of a bank they get more flexibility then dealing with the customer service department who do not have the experience, and many have never had a mortgage.
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Anonymous | 14 Nov 2009 1:23 pm
Surely if the people in question above took the correct insurances at point of sale (especially as they worked in financial services so would understand the risk) then they would not be meeting the issues they are currently faced with? I think the harranging and bad press PPI received is proving that there had been value in these policies that had been overlooked. Granted, a package appeared cheaper at point of sale if no insurances are in place, but surely debt management and the prospect of never working in the industry again that they probably spent years in selling other people the same policy, is slightly hypocrytical of them and their advisor to blame the lenders for their lack of understanding. These people appear to have borrowed money and were obviously not financially ignorant bearing in mind the industry they worked in, so knew the risks involved at the time of borrowing and agreeing to pay the lender the sum of money every month. It bothers me when people act irresponsibly and their broker lets them, only to blame the lender for not bending over backwards for someone who failed to prepare themselves for the worst case scenario! Ignorance is not bliss! BTW I am a broker and not a lender, and I still have this viewpoint.
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Anonymous | 4 Feb 2010 3:09 pm
The typical experience of the average sub prime consumer is as follows.
(a) failure of notification of the fact that their mortgage has been securitized usually within three to six months;
(b) absence of consent to a disposition of property as mandated by law
(c) failure to lawfully perfect the sale of the mortgage
(d) Failure of notification that by default any sub prime mortgage is placed on a block building insurance policy even if the consumer of the mortgage product has valid buildings insurance; compound interest is charged thereon;
(e) alleged none payment where payment has been tendered;
(f) alleged late payment where payment has been tendered upon date due;
(g) falsely alleged shortfalls in payments;
(h) failure to change payment due date to reflect that not all consumers are paid on regular dates or even the same date as collection is deemed due;
(i) false entries onto consumer accounts regarding alleged failed payments;
(j) failure to correct such entries after complaint;
(k) failure to amortize the debt with payments made over and above the interest due, thus creating a higher level of compound interest over the term of the mortgage and increasing over time the likelihood of default;
(l) failure to acknowledge consumer complaints;
(m) failure to respond within a reasonable time scale to consumer complaints;
(n) failure to comply with Data Protection Subject Access Requests;
(o) willful ignorance of duties under CPR 31.6 in respect of planned or listed litigation;
(p) commission of offences against both the Telecommunications Act 2003 and the Harassment Act 1997 in the form of unwarranted and intrusive telephone calls often designed to cause embarrassment for example with frequent calls made to the consumer's workplace; unlawfully threatening repossession via a telephone call;
(q) routine monthly access to and entry upon consumers credit reference files;
(r) Unlawful and punitively raised charges with no prior notification of their application; compound interest applied thereon;
(s) Failure to provide a breakdown of solicitors cost; dumping said costs onto arrears and applying compound interest thereon;
(t) undue haste in litigation and claiming to observe the CJC pre action protocols but failing absolutely to do so.
(u) Threatening consumers with costs which are at the discretion of the court;
(v) Breaches of the FSMA (2000); Mortgage Conduct of Business (MCOB) rules; the UTCCRs (1999) The Unfair Consumer Practices Directive (2008) and where applicable the Consumer Credit Act (2006); breaches of the criminal law in failure to register that a disposition of land has taken place (s.2 Property Act, 1989, s.127 Land Registry Act 2002); breaches of s.1 and s.5 of the Fraud Act, 2006.
(w) In litigation, failure to seek possession only as a last resort; failure to serve documents upon the defendant; failure to offer to capitalize genuinely constituted arrears; failure to accept temporarily reduced payments without inferring delinquency; failure to accept payments from customers in arrears where the full alleged arrears is not tendered, failure to refund unlawfully applied charges and compound interest applied; failure to waive charges where a performing arrangement for arrears clearance is in place;
(x) In suspended cases, the application of charges without notice in excess of the overage paid by consumers to clear their arrears; misrepresentation to the courts that such arrangements will clear the arrears when typically they will not, as a consequence of yet further charges disguised with various nomenclature as arrears management fee, litigation fee, arrears interest, interest charged and so on;
(y) Willful exaggeration of the consumer's genuine level of arrears, which may be typically half of the overall total claimed.
The FSA has been aware of this for months, if not longer, during which many more repossessions have been granted on false premises. The FSA simply has to act more quickly, if its statutory objective of securing the appropriate degree of protection for consumers is
How is it even possible for insolvent former Lehman's Brothers entities operating in the UK to bring an action in the courts, when they have securitised the underlying assets (title to the mortgages), are insolvent, have not submitted accounts and have no directors?
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