The Financial Services Authority (FSA) has today launched a consultation covering a package of measures to further protect mortgage holders from excessive charges from lenders should they fall into arrears. 

The proposals are also aimed at ensuring that consumers that have mortgage arrears are treated fairly and will reinforce the FSA’s tough stance in its battle against mortgage fraud. 

The key arrears proposals:

• firms must not add early repayment charges on arrears charges, or charge interest on those charges;
• must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
• firms are to  consider all options for borrowers and that repossession should always be the last resort;
• payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, with arrears charges being paid off later;
• firms are to keep all arrears handling telephone calls and records for three years. 

New proposals will also mean that not just mortgage advisers but also those who arrange non-advised sales will be individually accountable to the FSA, and they will need to demonstrate they are 'fit and proper' for their role.

Lesley Titcomb, FSA director responsible for the mortgage sector, said:

"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."  

Consultation on these proposals will close on 25 April 2010. 

FSA Press release   

Debtwizard comment

This can only be good news for the consumer as once implemented the mortgage lender will have to adhere to stricter guidelines. This should also prevent the escalating build up of arrears through unfair additional charges with interest added thereon.

These new measure will make it more difficult for fraudsters to operate and will bring better control of the market. Let's hope that it gets implemented following the consultation. The only moaners were the Council of Mortgage Lenders (CML) no change there.