New FSA rules to protect home owners

Proper protections in place for those in arrears on their mortgages or entering SRB agreements

 

Demonstrating the Financial Services Authority’s (FSA) commitment to intensive and intrusive supervision to ensure firms treat their customers fairly the FSA has set out the rules which will ensure there are proper protections in place for vulnerable customers in arrears on their mortgages or entering sale and rent back (SRB) agreements. It forms part of crucial next steps following the FSA’s Mortgage Market Review launched last October.

It defines the standards firms must follow on arrears handling and contains details of the full sale and rent back regime, to provide customers with greater protection from 30th June 2010.

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 30th 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.

Date Added: 28th June 2010