The Council of Mortgage Lenders (CML) said it broadly supported the Financial Services Authority’s(FSA) proposals on mortgage arrears handling, but said more work on the practical implications would be needed to avoid unintended consequences.
But the CML warned that the approved persons regime set to regulate bank branch advisers may be disproportionate for lenders. It said “the costs will far exceed the potential benefits.”
The CML added: “Within lenders there is typically a high level of consumer recourse to the institution over time, involving a range of functions, not just the original salesman or adviser."
The CML will now consider the proposals in more detail, and looks forward to working with lenders and the FSA to provide a constructive response to the proposals before the end of April deadline. The CML will also shortly be submitting an over-arching response to the mortgage market review discussion paper.
CML director general Michael Coogan observed:"We will need time to consider the FSA's proposals properly. But at first glance, the extension of the approved persons regime to both lenders and intermediaries appears heavy-handed. The number of sales advisers identified by the FSA also appears lower than we would expect, suggesting that the FSA may be underestimating the cost of implementing this proposal both for the regulator and firms."
The arrears handling proposals are in line with industry expectations, and we broadly agree with them. Even so, it is important to remember that increasing the compliance burden on the industry also increases costs - the FSA's cost/benefit analysis appears to suggest only a modest increase in costs, but experience shows us that actual regulatory compliance costs always tend to be much higher in practice."
Hannah-Mercedes Skenfield, mortgages manager at moneysupermarket.com, which welcomed the arrears proposals said: "moneysupermarket.com has championed the fair treatment of borrowers in arrears for some time now and we're pleased to finally see a real change in the rules that will benefit borrowers in difficulty.”
She added: “It is quite clear that lenders should never have been allowed to profit from those in financial hardship. The measures announced will spell the end of charging for what should have been free advice, allocating payments to pay off arrears charges rather than monthly repayments and charging over the odds for administration fees; practices which were not only unfair, but also detrimental to the stability of the mortgage market as a whole, as those in arrears were forced into further financial troubles.
She recommended any customers with complaints of ill treatment should tell them to contact their lender then the Financial Ombudsman Service.
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