Mortgage lenders are not always giving customers in long-term arrears appropriate support, the City regulator has found.
The Financial Conduct Authority (FCA) found inconsistencies in how home owners are being treated when looking into how lenders deal with customers who are more than 12 months behind on their mortgage.
The FCA said it has given feedback to firms it looked at – and is considering where in some cases further regulatory action in necessary.
It is reminding firms of rules which say they may only consider repossession as a last resort.
The FCA has previously identified a trend of increasing long-term arrears cases – although at the same time the number of homes being repossessed has been falling as low interest rates help to keep mortgages relatively affordable.
Good communication between lenders and borrowers who are struggling financially helps people to keep the roof over their head.
The regulator said that in the cases it had reviewed, firms were generally treating customers in long-term financial difficulty appropriately.
It saw examples of firms handling cases sensitively and agreeing reasonable arrangements with customers. Some firms also had specific call handlers or designated teams to give customers in difficulty a consistent point of contact.
However, the FCA also said: “We found some inconsistencies in firms’ arrears management practices that may result in a poor customer experience and have the potential to cause harm.”
The regulator described this as “disappointing”, particularly given that it had previously issued detailed guidance on good and poor arrears management.
The FCA found “isolated examples” of harm where customers were unable to recover from their arrears position and their mortgage debt continued to balloon. This was seen when customers were on high interest rates.
Other issues included incomplete record-keeping where customer case file notes had insufficient information, leading to customers having to repeat their circumstances on multiple occasions and potentially putting people off engaging with their lender.
Other issues included instances where people’s vulnerabilities were not picked up on, meaning they were not receiving appropriate support. Some firms did not regularly review the payment arrangements agreed to ensure they remained suitable.
The FCA also found examples where firms would repeatedly pursue arrangements to pay, when it may have been suitable for them to consider alternative options.
People were also sometimes expected to complete detailed forms about their finances to have their vulnerabilities registered – with little help from firms.
The FCA encourages mortgage customers to speak to their provider at the first sign of financial difficulty, when they have a change in circumstances, so potential solutions can be looked at.
Speaking up early may prevent the situation from getting worse as the lender may be able to discuss a wider range of options. It also gives the borrower more time to improve their situation.
Free, independent guidance is available from bodies such as the Money Advice Service (MAS).
Jonathan Davidson, the FCA’s executive director of supervision, said: “We know that many customers remain hesitant to contact their lender to discuss their mortgage arrears for a variety of reasons.
“We encourage customers to talk to their lender as early as possible as this may give them more time and options when it comes to the steps they can take.”
Jackie Bennett, director of mortgages at trade association UK Finance, said: “It is encouraging that, overall, the FCA did not identify widespread harm to customers from extended forbearance.
“The industry acknowledges the regulator’s findings of some inconsistencies in firms’ arrears management practices.”
She said anyone with concerns about making their mortgage repayments should contact their lender as soon as possible, to discuss the support and options available to them.
Ms Bennett continued: “UK Finance will continue to engage closely with the regulator, lenders and administrators to deliver fair outcomes for those customers in financial difficulty.”