Mortgage arrears handling

The Financial Services Authority has published proposals to strengthen existing rules on arrears handling.

 The key arrears proposals:

• Make plain that firms must not add early repayment charges on arrears charges and interest levied on those charges;
• Clarify that firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
• Compel firms to consider all options for borrowers.  Repossessions should always be the last resort;
• Confirm that 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
• Oblige firms to record all arrears handling telephone calls and to keep all records for three years.