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FSA cracks down on unfair mortgage arrears penalties

The Financial Services Authority today began work to prevent the unfair charges mortgage providers levy on borrowers who slip into arrears.

The regulator said it was taking a “tough stance” on the £1.2 trillion mortgage industry as it warned lenders that customers falling behind on payments were not a profit-making opportunity.

The measures are intended to help the 195,000 Britons in arrears on payments. Despite the FSA promising to stamp on arrears charges when it started a mortgage review in October, most banks still charge borrowers up to £35 for sending a letter or making a phone call about arrears. An appointment with a debt counsellor is billed at up to £100.

The state-backed banks NatWest and Royal Bank of Scotland slap customers with a £35 fee for returning a bounced cheque for a monthly payment, while Halifax charges mortgage holders £35 for every letter or phone call it makes about home loan arrears.

Lloyds, Santander, Bradford & Bingley and Alliance & Leicester charge struggling homeowners more than £80 for advice on repaying their debts.