Hot on the heels of the new government’s proposals on the issue of debt comes a “showing of teeth” by the FSA.  In particular, it will be recalled that one such manifesto proposal was that nobody should be forced to sell their home to pay unsecured debts of less than £25,000.  Further, that credit card companies should be obliged to provide better information to their customers.  In general, that both lenders and debtors alike should be encouraged to act more responsibly.

Today, the FSA has spoken of “intensive and intrusive supervision” to ensure firms treat their customers fairly.  Specifically, the FSA’s new rules include:

• All mortgage advisers and those who arrange non-advised sales will be held accountable and will be required to demonstrate that they are ‘fit and proper’;
• 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;
• Firms must consider all options for borrowers with repossession always being the last resort;
• Firms must record all arrears handling telephone calls and keep those records for three years;
• Cold calling and the dropping of promotional leaflets through letter boxes shall be prohibited.

By way of explanation of these new rules, Lesley Titcomb, the FSA director responsible for the mortgage sector, has cited instances of vulnerable homeowners being evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies.  The FSA announcement also sets out its disapproval of the practice of arrears charges being taken from customers already in difficult circumstances and trying to get their finances back on track. 

It is fair to say that many of the new rules introduced today by the FSA are already implemented in some form by lenders under their own TCF policies.  In addition, lenders are always sympathetic to those who are struggling to make repayment and will, as a matter of course view repossession as a recourse of last resort.  However, the new FSA rules do provide greater clarity as to the FSA’s expectations of lenders and their advisors.  In addition, the FSA has, by setting out these specific and identifiable rules, laid down a marker as to its attitude to customers who are in arrears and its determination to protect those most at risk.  In Lesley Titcomb’s own words “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.”