Lenders given ‘fairness’ deadline

The City watchdog has threatened lenders with fines if they fail to give fair treatment to customers when dealing with arrears on home loans.

Mortgage providers have been given a deadline of 31 January to prove that customers facing arrears or repossession are treated fairly.

Previous criticism of lenders’ policies by the Financial Services Authority (FSA) prompted an angry response.

The move comes shortly before a drop in some lenders’ variable mortgage rates.

‘Challenging environment’

The FSA has written to all chief executives of mortgage lenders and administrators telling them to review their arrears policies.

“Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for sometime,” said Jon Pain, FSA retail managing director.

“In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers.”

Previous criticism of “weaknesses” in arrears and repossession policies led to a strident response from the Council of Mortgage Lenders (CML) which was angry that all lenders were grouped together for criticism.

The CML said most lenders had well-structured policies.

Adrian Coles, director general of the Building Societies Association (BSA), welcomed the latest move.

“With arrears forecast to increase over 2009, it is essential that all lenders ensure that their arrears and repossession policies treat customers fairly,” he said.

“Building societies want their borrowers to remain in their homes if they have repayment difficulties, and genuinely view repossession as a last resort.”