There are two key questions here. First, do these charges – which range from £22 to £50 per month depending on the lender and its terms and conditions – reflect the true cost of administering accounts in arrears?
A case is being made that fees are excessive and should be challenged by clients.
I understand that the Financial Services Authority is investigating this question and also that the Financial Ombudsman Service is beginning to receive complaints from borrowers.
Second, do these charges increase the likelihood of some borrowers’ homes being repossessed? It is worth mentioning here that the charges normally attract interest at the contractual rate, which would seem to undermine borrowers’ efforts to clear their arrears in a reasonable timescale.
At this point I should declare an interest. To a large extent it was Paymex Group that brought this issue to the attention of the media, via an interview on the February 20 edition of BBC Radio 4’s Moneybox.
While I appreciate that these charges are spelt out in the terms and conditions of mortgages I believe all lenders should follow the example of organisations such as HBOS and reconsider their policies on imposing mortgage arrears administration charges before the regulator forces them to do so.