CML responds to FSA arrears findings

The Council of Mortgage Lenders welcomes the FSA's confirmation that mainstream lenders are largely complying with its arrears and repossessions requirements.

The CML is surprised at the FSA's observations on specialist lenders, who have been working extremely hard to manage arrears, but urges the FSA to work constructively with those lenders to ensure there is shared understanding and agreement about the FSA's requirements.

The mortgage lending industry is making strenuous efforts to ensure that repossession is only taken as a last resort, when other realistic alternatives cannot be found that balance the interests of the borrower and the lender.

In a letter from the CML to the Chancellor Alistair Darling on 4 June, a whole range of voluntary initiatives that the industry is taking were outlined. CML members provide a significant range of information to borrowers to enable them to get access to good quality advice to help them if they face difficulty.

The CML's letter to the Chancellor pointed out that the credit crunch has affected the mortgage lending industry in different ways depending on whether the lender is large or small, retail or wholesale funded, traditional or specialist. From a lender's perspective, in the current commercial environment, it is important to differentiate arrears management processes according to a range of factors.

Some specific examples of current CML work to address arrears and possessions issues include:

A new forthcoming e-learning training course on arrears and possessions for staff working in lenders' arrears departments

Support and technical input to help achieve a workable "pre-action protocol" for court action relating to arrears cases

Increased regular dialogue with both consumer groups and government departments to identify how the overall safety net for consumers can be practically improved, and to facilitate good channels of communication between lenders and advice agencies

Developing industry guidance on arrears management policies, which will be updated in the light of the FSA findings.

In addition lenders are:

providing information for consumers on their own arrears management process to help borrowers understand what to expect and how they will be treated fairly.

contacting borrowers in good time when they are coming out of initial deals onto higher rates with increased monthly repayments, and encouraging them to make contact if a financial problem is likely to arise.