July saw another lender hit the news for levying what the FSA described as excessive fees on the accounts of customers who fell into arrears. Redstone Mortgages were fined £630,000 for charging excessive fees between 1 January 2007 and 5 August 2009. Some estimates suggest repayments to clients could cost Redstone up to £500,000. Redstone follows Kensington and GMAC into the dock on this issue, who were fined £1.23m and £2.8m respectively.
The FSA’s interventionist stance on arrears fees is bolstered by its proposed amendments to MCOB 12 to address poor practice in arrears charges.
http://www.fsa.gov.uk/pages/Library/Policy/CP/2010/10_16.shtml
The FSA’s Mortgage Market Review Consultation Paper CP10/16 published on 13 July proposed amendments to MCOB 12.4 The FSA has put out a draft instrument that effects the clarifications. Under MCOB 12.4.1R firms’ charges must reflect a reasonable estimate of the additional administration cost as a result of a customer being in arrears. The FSA does accept that lenders can attribute a proportion of shared overheads, but it has set out some overhead costs that cannot be included, such as financial reporting, unrecovered fees and bank charges.
This follows changes to MCOB 13 set out in the FSA’s Policy Statement PS10/9 prohibiting the levying of arrears charges where customers have a performing arrangement to pay (most lenders had implemented this change well in advance of the deadline of 30 June)
Other changes in the pipeline include amending MCOB 13.3 to prevent lenders re-presenting Direct Debits more than twice in a calendar month, unless any additional administration fee is waived. The FSA is considering widening MCOB 12.4 and 13.3 to apply to one-and two-month payment shortfalls – an area for TPA’s to watch in the overlap between primary and special servicing.
The FSA’s hard line on arrears and administration charges continues to encourage defended mortgage possession claims, for futher information about this please see our Spring Banking & Finance eshot.
