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FSA must get tough on mortgage providers, says Which?

06 July 2009

As the Treasury Select Committee (TSC) prepares to question the Financial Services Authority (FSA) on mortgage arrears and access to mortgage finance, Which? principal policy adviser, Dominic Lindley, says:

“Despite lenders pledging sympathy with their mortgage customers, many are hitting people in arrears with seemingly excessive charges. Surely it can’t be right to profit from those in financial difficulty.

“It’s extraordinary that the FSA refuses to name the lenders that it says are treating customers unfairly; it’s effectively protecting the commercial interests of companies trying to evict people from their homes. How will lenders be persuaded to improve their practices unless the FSA names and shames them?”

Notes to Editor

Which? submitted a Freedom of Information request asking for the names of the lenders which the FSA had found treating customers in mortgage arrears unfairly as part of its thematic review of this area. The FSA replied that:

"On balance, I consider that the need to protect the firms' commercial interests and the FSA's efficiency and effectiveness in conducting and maintaining open and candid exchanges of information and views with firms, outweighs the public interest in providing the information to you..."

Which? believes the FSA should:

  • Immediately publish its assessments of which lenders have been performing poorly with regards to treatment of customers in mortgage arrears and repossessions.
  • Submit this information to the Judges hearing repossession cases involving these lenders.
  • Levy high fines on those which consistently flout the rules. The revenue from these fines should be used to help borrowers access independent debt advice rather than be returned to the industry in the form of lower regulatory fees.

Which? is calling on the TSC to recommend:

  • The Committee should ask lenders to provide an itemised breakdown of the additional costs their arrears charges are supposed to cover.
  • The FSA/OFT should review all arrears charges made by mortgage providers and secured lenders to determine whether they are reasonable. Any excessive fees should be automatically refunded to the consumer.
  • All arrears charges should be suspended if a consumer has made an agreement to pay off the arrears.
  • Consumers in discussions with an independent debt advice agency should be given a 90 day charge free window in which to negotiate an arrangement for the repayment of arrears.
  • Consumers should be allowed to change their payment date without charge to help minimise the possibility of missing payments or getting into arrears.
  • Double dipping of fees (levying a fee for the missed payment on both the current account and the mortgage) where a consumer has a current account and a mortgage with the same bank should be stopped.
  • Requests for Direct Debits should not be automatically re-presented later in the same month unless requested by the customer.