FSA warns mortgage companies to treat customers fairly

The Financial Services Authority (FSA) has written to the chief executives of all mortgage lenders, giving them until January 31, to ensure customers facing arrears are being treated fairly.

It is the second warning letter to be sent in recent months, and follows an earlier review, which found weaknesses in arrears and repossessions handling and lending to people facing impaired credit histories and repossession.

In the letter Jon Pain, FSA retail managing director, said:
"Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for sometime. In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers, including when they go into arrears."

He continued:
"The fair treatment of consumers in arrears will continue to be a priority for the FSA throughout 2009. Where we find that lenders are not complying with our requirements we will make appropriate and properly targeted use of our existing regulatory tools, which may include enforcement action"

The FSA is calling on mortgage lenders to review their current arrears policy and management practices. The FSA expects firms to address any weaknesses as a matter of urgency and file a report, along with any action they plan to take, by January 31.

The number of homes being repossessed is expected to rise sharply next year as the economy worsens and unemployment rises.