FSA clamps down on arrears management
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The Financial Services Authority is proposing to tighten its rules on arrears management in response to issues flagged up in last year’s Mortgage Market Review.
The regulator is also planning to make all mortgage brokers and those who advise non-advised sales individually accountable to the FSA, and demonstrate they are “fit and proper” for the role.
The FSA says its crackdown on arrears handling reflects its ongoing work in this area, which uncovered “high levels of consumer detriment particularly in the specialist lending sector.”
The key arrears proposals from the FSA are to:
- Make plain that firms must not add early repayment charges on arrears charges and interest levied on those charges;
- Clarify that firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
- Compel firms to consider all options for borrowers. Repossessions should always be the last resort;
- Confirm that payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later; and
- Oblige firms to record all arrears handling telephone calls and to keep all records for three years.
Meanwhile, the FSA also plans to extend the approved person regime, which it says will have significant benefits for consumers.
The regulator says it made it clear through the MMR that it wanted a strong, viable and clean marketplace and its requirement for mortgage advisers to prove they are fit and proper will help to remove dishonest individuals from the industry and to keep them out.
Lesley Titcomb, FSA director responsible for the mortgage sector, 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.”
