New steps set out to ensure borrowers are treated fairly

The proposals aim to strengthen existing rules on arrears handling,  which was one of the urgent issues flagged in the Mortgage Market Review discussion paper last October.

The key arrears proposals are:

• Firms must not add early repayment charges on arrears charges and interest levied on those charges;
• They 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, with repossessions always being the last resort;
• 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
• Firms are to record all arrears handling telephone calls and to keep all records for three years.

New proposals will also mean all mortgage advisers and those who arrange non-advised sales will be individually accountable to the FSA, and need to demonstrate  they are ‘fit and proper’ for their role.

According to the regulator the extension of the approved person regime will also have significant benefits for consumers . The FSA has made it clear through its review of the mortgage market that it wants a strong, viable and clean marketplace and its requirement for mortgage advisers to prove they are fit and proper will help to remove, and keep out, dishonest individuals from the industry.