The Financial Services Authority (FSA) has proposed new rules to protect homeowners who are in mortgage arrears. The new rules will aim to ensure borrowers are treated fairly, that repossessions are a last resort and borrowers don’t have to pay unfair charges on their arrears.

The FSA want to ensure lenders do not see mortgage arrears as an opportunity to profit from customers in unfortunate circumstances.

The proposals are part of a mortgage crackdown after research identified the aggressive treatment of some lenders towards those in mortgage arrears. Many lenders were breaking the responsible lending rules.

The main points of the FSA’s new proposals include:

• Firms must not add early repayment charges onto any arrears charges, or charge interest on those charges.
• Firms must not levy a monthly arrears charge if the firm and the customer have agreed a plan to repay the arrears.
• Firms must consider all options for borrowers and use repossession as a last resort.
• Payments by customers in financial difficulties must go to clearing arrears first, with arrears charges being paid off later.
• All telephone calls and records about customers’ arrears must be kept for three years.

The FSA also aims to protect consumers by removing dishonest mortgage advisors from the industry and making them personally accountable to them. They will be required to prove that they are fit and able to give out mortgage advice. Dozens of brokers have already been suspended by the FSA over the past year for fraudulent behaviour and giving unsuitable advice.

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