Building Societies Association
Feature
Arrears & Approved Persons Consultation Paper
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Contact: Victoria Barnard Date: 12 Feb 2010 |
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On 26 January 2010, the FSA published the first, of what is expected to be a series of consultation papers, as part of its ongoing Mortgage Market Review. This initial paper relates to changes to the treatment of arrears and which roles will be required to become approved persons (CP 10/2).
The CP is in two parts, the first part details changes to how lenders manage borrowers in difficulty, including restrictions on charges and fees. The second part details proposals to require all mortgage advisors to become Approved Persons.
Arrears
The key arrears proposals are:
- Firms must not charge early repayment charges (ERCs) on arrears fees and interest levied on those fees;
- Firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
- Firms will be required to consider all options for borrowers. Repossession must always be the last resort;
- Payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later; and
- Firms will be required to record all arrears handling telephone calls and to keep all records for three years from the date the arrears are cleared.
Approved Persons
The key proposals are:
- FSA will create a new category of approved person - customer function CF31 - which will account for all individuals that advise or bring about home finance business, both now and in the future. This applies to both intermediary firms and lenders.
- Firms will be required to have in place a named individual, that is responsible for compliance and compliance oversight, of the firm’s regulated activities for home finances intermediaries and home finance providers.
- all mortgage advisors are to be personally accountable to the FSA
- The Approved Persons proposals apply to those advising on arranging non-advised sales in relation to regulated mortgage contracts, regulated sale and rent back agreements, home purchase plans and home reversion plans.
Next Steps
The deadline for responses to the CP is 30 April 2010.
The BSA has had a preliminary discussion with the FSA and raised some concerns with the practicalities of implementing some of the proposals, specifically:
- The impact of capitalisation and the charging of ERCs on arrears fees. If the fees and arrears are capitalised into the balance, there will be no distinction in how the balance is broken down.
- The cost implications of smaller societies implementing call recording, based on the small number of borrowers they have in arrears.
- The impact of the Approved Persons Regime on a lender's processing staff. The current proposals would capture underwriters and administration staff involved in approving the loan, which we strongly believe is disproportionate
The FSA has acknowledged these concerns and is keen to work with the industry to resolve them. We will be working with the FSA during the consultation phase.
The BSA has set up a working group to focus on call recording for smaller lenders. This group will work to define 'small' and agree a solution to put forward to the FSA. If you would like to participate, please contact Vicky Barnard (Victoria.barnard@bsa.org.uk).
The majority of consultation with members will be primarily via the Arrears and Possessions Panel, and the Strategic Mortgage Panel, as well as via circulars from the BSA website. If you would like to join the panels or be involved in any other aspects of the CP, please contact Vicky Barnard (Victoria.barnard@bsa.org.uk).
