Existing clients tel 0141 337 1346

"Disappointing" inconsistencies found in firms' arrears management practices

10 December 2018 Written by Prosperity Financial Solutions Category: Mortgages

The Financial Conduct Authority (FCA) has stated they are disappointed in how mortgage lenders are treating those vulnerable borrowers in arrears and reported on the key issues.

Although the regulator did find customers in long-term financial difficulty are generally treated well by mortgage lenders, many were not receiving an adequate level of support because their vulnerabilities were not being identified.

In its thematic review of long-term mortgage arrears, published on the 6th December, the FCA discovered some inconsistencies that could result in a disappointing experience for customers and have the ‘potential to cause harm’. Isolated examples were discovered when customers on high-interest rates could not recover from their arrears position, and their mortgage debt continued to increase.

Some examples of firms’ mismanagement include:

  • Incomplete record keeping: customer case file notes had insufficient information and therefore resulted in customers repeating their circumstances and potentially leading to customers being disengaged.
  • Inaccurate communications: firms held incorrect information as they did not review the correspondence before it was issued.
  • Lack of consideration of options: firms would repeatedly pursue repayment arrangements even when it may have been suitable for them to consider alternative options.
  • Barriers to effective engagement: in order to have their income and expenditure assessed and vulnerabilities registers, customers were required to complete detailed forms with very little help from firms.

The FCA reported that there are now 14,000 more households in serious arrears than in 2008. Low-interest rates mean that those in arrears on their mortgage are not seeing their debt spike, yet there is an expectation that rates will rise which will put more pressure on these homeowners.

Executive Director of Supervision, Retail and Authorisation at the FCA, explained:

“We found that the number of homes in serious arrears has risen to 70,000, but repossession rates per year have dropped to 2.7 per cent.

It makes sense to forbear when interest rates are low. If interest rates start to go up, I’m afraid the repossessions will also rise.”

Contact Us

For professional guidance on mortgages, speak with a member of our specialist team today via the online contact form.

Call 0141 337 1346 Existing clients tel 0141 337 1346

Get financial advice now

Please let us know your name.
Please let us know your email address.
Please enter a valid phone number
What are you looking for advice on? Invalid Input
Please select your preferred date/time for an appointment Invalid Input

(Please note this is not an official booking form and our team will be in touch with a confirmed date/time)

Please let us know your message.
Invalid Input