MMR: FSA to limit arrears charges
Share
The Financial Services Authority will limit the number of missed payment charges and direct debit requests imposed on borrowers in arrears under Mortgage Market Review proposals published today.
The final consultation paper of the MMR says the regulator plans to go ahead with its earlier proposal to limit the number of times a borrower can be charged for missed payments, at twice a month for failed direct debit requests.
But it is also adding a new proposal which would see the number of times a lender can request a direct debt capped at twice a month.
The MMR says: “It is unlikely that any further attempts within a month will be successful and attempting more simply serves to impose on the borrower repeated failed payment charges from their bank.”
The FSA will also be going ahead with plans to extend its arrears charges rules to all payment shortfalls and not just ‘arrears’, which are defined as a shortfall of two or more payments.
It says this will prevent lenders from imposing excessive arrears charges in the first month of payment difficulties.
In addition, the regulator has introduced a new proposal that would put a stop to lenders removing concessionary interest rates if a borrower has a payment shortfall.
It says its existing arrears charges rules allow firms to withdraw concessionary rates, but says it is concerned this could make a borrower’s financial position worse if they are already in payment difficulties.
The MMR says: “We therefore propose to delete the existing arrears charges rule which allows firms to do this. However, we do propose to include in its place a new general provision which recognises that a firm should be able to consider withdrawing a concessionary rate for material breaches of contract unrelated to mortgage payment shortfalls.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
