FSA may have to reveal firms it is investigating over arrears charges

29 March 2010 | By Natalie Thomas

The Financial Services Authority may be forced to reveal the seven firms it is investigating for arrears handling if the Financial Services Bill is passed in its current form.

The regulator launched an inves-tigation last June into the way some specialist lenders and third party administrators have treated customers in arrears.

The only firm that has been identified in this investigation is GMAC-RFC.

The lender was fined £2.8m last October and forced to pay up to £7.7m in redress for hitting borrowers in arrears with charges that the regulator deemed to be excessive and unfair.

The FSA has refused to name and shame the other firms that are under investigation.

But it has emerged that a clause in the Financial Services Bill before parliament contains provisions that would force the regulator’s hand in identifying the firms.

Speaking at a Treasury Select Committee hearing on arrears Jon Pain, managing director of super-vision at the FSA, says: “We wait to see what progress that bill makes but if those provisions are adopted that would change the process at the stage at which a firm would be identified as part of that enforcement process.”

Pain adds that the £2.8m fine for GMAC was significant as it demonstrated that there will be conse-quences for firms that do not treat customers fairly.

Earlier at the same hearing John McFall, chairman of the committee, said that the FSA had previously justified its refusal to disclose firms being investigated by saying that a referral to enforcement does not mean they are guilty.

McFall asked whether the witnesses had sympathy with this view or whether the regulator was just procrastinating.

In response Dominic Lindley, principal policy adviser at Which?, told MPs that he thought the regulator had dragged its heels over the arrears probe.

He says: “The FSA must have some suspicion about these firms because it is a risk-based regulator. It only refers firms to enforcement when there is a suspicion they are breaking the rules.

“The FSA has to make a choice about whether it wants to continue with this ’quiet word in your ear’ approach to regulation or whether it wants to get tough and achieve a credible deterrent.”

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