Arrears charges 'should be reasonable'

13/07/2009

Lenders should ensure that the fees they charge borrowers for falling into arrears adequately reflect any costs, according to a consumer watchdog.

Which? made the claim following news that the Financial Services Authority (FSA) was investigating lenders who have allegedly mishandled arrears, but had not named the firms involved.

The group's personal finance campaigner Dominic Lindley told BBC Radio 4's Money Box programme that the "quiet-word-in-your-ear kind of regulation isn't working" and called for "very high fines".

He added: "There's no evidence that these [charges] are a reasonable reflection of the cost and they can be charged regardless of whether you have entered into an agreement to pay off those arrears."

Jon Pain, FSA managing director of retail markets, told a committee of MPs that the names of the lenders would not be revealed "until the full enforcement process is complete".

EuroDebt director Kevin Still commented: "Arrears charges are a major contributor to people in genuine financial difficulty falling into deeper arrears despite the fact that they may have followed the advice of the lender and met criteria for financial hardship laid down in the banking code and mortgage arrears protocol."

Tags; Housing Debt and Bills,

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