Regulator Introduces More Protection For Loan Customers
There have been growing concerns over the past couple of years about the rising level of loan arrears being built up by individuals on their home owner loans and mortgages, largely caused by the effects of the recession and increasing unemployment.
The financial regulator, the Financial Services Authority (FSA) and a number of consumer help groups and organisations have also been concerned about the manner in which some home owner loan companies treat their customers who are unfortunate enough to fall into an arrears situation on their loan and as a result of this, the FSA has published new proposed regulations to ensure that lenders are treating their customers fairly.
The new rules to be introduced have come as a result of the Mortgage Market Review (MMR) which was conducted by the FSA in October last year and highlighted a number of areas of concern amongst lenders, particularly in their approach towards loan arrears handling procedures.
The main proposals from the FSA are as follows: lenders must not add early repayment charges, or charge interest on any arrears charges which have been applied to the loan, no monthly arrears penalty may be charged where the borrower has made arrangements to repay any arrears, lenders must consider all options for customers with loan arrears before repossession, any additional repayments from borrowers must be used to clear the arrears, not the charges added to the loan and all telephone calls regarding arrears handling must be recorded and stored for three years.
Lesley Titcomb of the FSA said “Today’s proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulty are treated fairly. Lenders need to be in no doubt of their obligations to customers who fall behind with their payments and must realise that such circumstances are not an opportunity to create further profits.”
