FSA warns lenders to be fair to borrowers in arrears

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by Lin Freestone

A warning has been issued to lenders by the Financial Services Authority (FSA). Mortgage providers have been given a deadline of 31 January 2009 to prove that customers facing arrears or repossession are treated fairly.

The FSA’s rules concerning the treatment of mortgage customers in arrears state that lenders should have a written policy that reasonable efforts are made to enable customers to be able to pay back arrears over an agreed timescale. Customers must be alerted to the independent advice that is available. Repossession must be a last resort.

The director general of the Building Societies’ Association has welcomed the initiative. He stresses that it is vital that borrowers with repayment difficulties contact their lender, where they will be heard sympathetically, and offered advice.

Building societies want their borrowers to remain in their homes if at all possible, and genuinely view repossession as a last resort.

Earlier this year, the FSA conducted a review which revealed concerns about the way some lenders dealt with arrears and repossessions, which are currently rising. The Council of Mortgage Lenders has reported that 168,000 borrowers were at least three months behind on repayments at the end of September.

Within the next two months, lenders must have informed the FSA of the measures they have taken to assess their practices to follow the guidelines laid down, and to have signed up to the deal.