The Financial Services Authority has published proposals to strengthen existing rules on arrears handling.
The key arrears proposals:
- Make plain that firms must not add early repayment charges on arrears charges and interest levied on those charges;
- Clarify that firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
- Compel firms to consider all options for borrowers. Repossessions should always be the last resort;
- Confirm that 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
- Oblige firms to record all arrears handling telephone calls and to keep all records for three years.