by Mark Johnston
The Financial Services Authority (FSA) has announced new rules to protect struggling homeowners. The rules which were laid out by the incumbent financial industry regulator are welcomed by many including mortgagerates.org.uk
Early this month the new coalition government announced plans to scrap the FSA and replace it by giving new powers to the Bank of England. In what may be one of the last major changes outlines by the FSA, the new regulations will provide added protection for those struggling to keep up with mortgage payments. The plans set out regulations which ban some charges that are applied by lenders which can be several hundreds of pounds; even if the borrower has set up a payment plan. Historically it was seen that proactive conscientious borrowers who found themselves in difficulties were still being penalized even when they had agreed payment plans with their lenders.
Under the new plans, lenders will not be able to charge these additional fees once an agreement is in place. The ideas is to treat Customers in mortgage arrears, and those who have joined sale and rent back agreements more fairly.
In the past customers making payments following a time of difficulty found that their monthly payments were going towards covering these additional ‘late’ fees rather than covering their ‘missed’ payments. The FSA’s move will remedy this whilst also forcing lenders to consider all other options when dealing with borrowers in difficulties; the move will mean that repossessions will only be considered as a last resort.
The new regulations also cover the sale and buy back schemes that many companies are offering. These schemes offer to purchase the struggling borrowers property to help them out of debt and then rent the property back to them. Although these schemes have helped many; some companies that offer such schemes employ dubious sales tactics and often borrowers are worse off.
The FSA has effectively banned companies from using unfair tactics and aggressive sales techniques on susceptible homeowners. The rules go as far as banning exploitative advertising and high pressure sales techniques and prevent companies from using terms such as ‘fast sale’, ‘mortgage rescue’ and cash quickly’ in promotional literature and advertising.
Sale and buy back companies will also have to provide a 14 day cooling off period to customers joining their scheme. The cooling off period will allow customer to change their mind and cancel any agreements within the 14 day period. The crackdown will also ban companies from cold calling customers or from using direct mail leaflets posted to peoples homes.
The FSA has previously suggested that homeowners who have had excessive charges added to their accounts to demand their money back. There have been some reports of success as some borrowers have complained to the financial ombudsman service. FOS (Financial Ombudsman Service) is an independent service for settling disputes between businesses providing financial services and their customers.
Mortgagerates.org.uk welcomes any move to provide a fairer system that protects borrowers when they get into trouble. Although we recognize the benefit that sale-and-buy-back schemes can provide a viable option for home we also urge our readers to be cautious. Many schemes pay far below the market value to purchase the property and play on the fears of repossession of the borrower. Although the idea is that the homeowners are then able to rent the property, there is no guarantee that they are allowed to stay in their home in the long run.
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