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Company fined for unfair mortgage charges
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The Financial Services Authority (FSA) has already warned mortgage lenders about their failing standards in treating cases of mortgage arrears. And in October 2009 the Authority fined specialist lender GMAC-RFC £2.8 million for its unfair treatment of customers in arrears.
On top of that, the FSA ordered GMAC-RFC to pay another £7.7million plus interest to over 46,000 borrowers.
This is because the FSA ruled that over a 4 year period, GMAC-RFC had levied unfair charges on top of mortgage arrears, including a monthly arrears charge of £45.00. GMAC-RFC was also criticised for failing to arrange suitable repayment plans with borrowers struggling to pay their mortgages and for repossessing properties too quickly before considering alternative actions.
Following the GMAC-RFC case the FSA has now warned other lenders that it will not allow their customers with mortgage arrears to be treated unfairly. Already up to seven lenders are under investigation and at risk of being fined, with many more who charge a monthly amount on mortgage accounts in arrears now also feeling the heat.
And so to January 26 2010, when the FSA once again championed borrowers with the release of its Mortgage Market Review discussion paper. In this the FSA proposed that mortgage lenders must:
- Not add early repayment charges on arrears charges, nor levy interest on those charges
- Not apply a monthly arrears charge where lender and customer have agreed an arrangement to repay the arrears
- Allocate payments by customers in financial difficulties to clear missed mortgage payments, not the arrears charges (which can be repaid later)
- Consider all options for borrowers and make repossession the last resort
- Record all arrears-handling telephone calls and keep all records for three years
The consultation period for these new proposals closes on April 25 so it will be the latter half of 2010 before standards will start to improve. Which means that some 195,000 borrowers who were in arrears at the end of 2009 may still have some sleepless nights ahead.
While we all wait for the FSA to bring in new rules, you can still protest against unfair charges applied to your mortgage account. Contact your mortgage lender to register your complaint, which they must acknowledge within 5 days and reply to within 8 weeks.
If you're not satisfied then you can contact the Financial Ombudsman Service (FOS) which is free and financial firms are bound by its decisions. However, as a consumer you could still take your case to court.
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Bryan Nott
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05/02/2010
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