FSA comments unfair, lenders say

Posted by admin on 14 August, 2008 under Business news | 3 Comments to Read

The Financial Services Authority (FSA) has been accused by mortgage lenders of being “unfair” in its recent criticism of their repossession policies.

Last week the regulator warned it would take action against lenders who were too aggressive to customers in arrears.

But the Council of Mortgage Lenders (CML) said the FSA was wrong to suggest the whole industry was at fault.

The FSA replied that potential problems with repossession policies were found with all types of lender.

“There were issues discovered across the piece with all lenders which is why the warning was addressed to the whole market place,” said an FSA spokeswoman.

Unhappy

The unusual public spat between the two bodies hinges around a press release published on 5 August.

“In tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?” CML

In it, the FSA published the findings of a “thematic review” of how lenders deal with customers who are behind with their mortgage repayments and thus are in danger of losing their homes.

The regulator did acknowledge that the aggressive approach of which it disapproved was not typical of mainstream lenders, but was more usually found among specialist lenders.

It found that they were too keen to repossess at the first sign of a customer’s financial problems.

But the CML is very unhappy about the presentation of the FSA’s findings, which it said were confusing to lenders and in danger of misleading the public.

“The key message given to media and the industry was that lenders are failing to treat customers fairly,” the CML responded in its latest fortnightly newsletter.

“But in tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?”

“To publish a report in such ambiguous terms is unfair and confusing for the majority of lenders who are making significant efforts to comply [with industry rules],” it added.

Payment problems

Recent figures have shown that repossessions are on the rise, going up by 41% in the first half of the year, and are expected by lenders to reach 45,000 in total this year.

Although that would be a level of repossession that is far lower than in the housing recession of the early 1990s, there are many more potential problem cases in the pipeline.

The CML estimates that by the end of the year there may be 170,000 people who are more than three months behind with their repayments.

The FSA responded by repeating its earlier conclusions about mainstream mortgage lenders.

It said it had found that some of them could do more to help with their customers’ arrears; levied unfair charges on customers; and didn’t pay enough attention to the way debt recovery agencies or bailiffs acted on their behalf.

News reported by The BBC