The FSA has also confirmed its plans to make all mortgage advisers and those who arrange non-advised sales personally accountable. They will be required to demonstrate they are ‘fit and proper’, helping to clamp down on mortgage fraud and enabling the FSA to monitor individuals in the mortgage market.
Customers in arrears must be treated fairly by firms and the following key areas have been confirmed;
– Firms must not apply a monthly arrears charge where an agreement is already in place to repay the arrears;
– 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 must consider all options for borrowers. Repossessions should always be the last resort.
A new rule has also been introduced requiring firms to record all arrears handling telephone calls and to keep the records for three years.
From 30 June sale and rent back customers will be better shielded from firms using aggressive or unfair methods. Some of the full protections include:
– Banning of exploitative advertising and high-pressure sales techniques and prohibiting the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature;
– A 14-day cooling-off period to give consumers more time to make decisions on sale and rent back;
– Banning of cold calling and prohibiting firms from dropping promotional leaflets through letter boxes;
– Security of tenure for customers for a minimum of five years;
– Measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process.
Lesley Titcomb, FSA director responsible for the mortgage sector, said:
"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter controls were vital. Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.
"We also think it is wrong that arrears charges should be taken from customers already in difficult circumstances and trying to get their finances back on track. Today’s rules make absolutely clear the standards we expect of firms, and we have already taken tough action against some of the worst offenders."
The measures announced today will also require that all mortgage sales staff have to be FSA approved or face a penalty and all firms active in the sale and rent back market must be authorised or face potential fines. The FSA is proactively monitoring the SRB market for unauthorised activity, and will take action if necessary.
Not being treated fairly or having all the facts can be a source of real distress for people in already difficult circumstances.
CML director general Michael Coogan commented:
"In financial regulation, as in football, whether we like it or not the referee’s decision is final. In this case, while we may feel somewhat harshly treated in relation to the treatment of lenders under the approved persons regime, we do recognise that the FSA is trying to make sure there is a clean game.
"We will now be working closely with the FSA on the next stage of its mortgage market review, and the crucial issues of what sort of mortgage products and what sort of verification processes it will expect in the future. These aspects have the potential for major impacts on consumers and the market – either positive or negative. It is vital that the industry and the regulator work closely together to achieve the right outcomes, introduced at the right time taking account of the state of the market, if we are to put in place a sustainable mortgage regime for consumers, lenders, intermediaries and regulators alike."
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