This will help lenders ensure that their arrears management policies fulfil the objective of making repossession a last resort. The CML has taken into account feedback from advice agencies to ensure that it balances the interests of consumers and lenders.
The guidance pulls together, and builds on, both the requirements of the FSA's rules in MCOB 13 (which set out how lenders should treat arrears and possessions) and the FSA's "treating customers fairly" principles. It should be read in conjunction with the consumer information on what to expect from lenders in arrears cases.
The guidance is a further step in strengthening the robustness of existing practices, alongside the Civil Justice Council's pre-action protocol for court cases on repossession, also published today.
The aim of the guidance is to give lenders a practical guide to the requirements, and examples of good practice against which they can benchmark their own policies and procedures. It is not a definitive statement of what lenders "should" do in each case, but rather a reference point to support lenders' self-assessment of their own policies and procedures.
CML Director General, Michael Coogan commented: "Despite the fact that the rate of repossession is modest, we recognise that there is significant public concern about this subject. The new guidance should help to reassure consumers that lenders are genuinely committed to seeing repossession as a last resort, and that the checks and balances that protect consumers are in place."
Citizens Advice Director of Policy, Teresa Perchard, added: "People facing payment problems worry about whether they will get fair treatment and may put off seeking advice as a result - but the earlier people seek advice the better. We welcome this guidance, which acts as a good yardstick for borrowers and money advisers about the kind of practical treatment they might expect to see from responsible lenders."
Lesley Titcomb, FSA Director responsible for the Mortgage Sector, observed: "We welcome the CML's industry-led efforts to embed the principles of treating customers fairly alongside the conduct of business rules in this particularly important area."
Looking ahead, the CML believes that the changes to Income Support for Mortgage Interest (ISMI) due to take effect next April, which will reduce the initial waiting period on eligible claims from 39 weeks to 13 weeks, will be helpful but should be implemented sooner.
But the CML thinks that even more scope remains for the Government to consider widening ISMI, which at the moment does not help joint-income households where only one borrower loses their income. Individual entitlement - rather than household entitlement - would be an effective and useful change that would help households for whom lack of income, rather than lack of advice or forbearance, is the fundamental problem.
The CML also welcomes the announcement that the Government accepts the recommendation from the Office of Fair Trading on FSA regulation of the sale and rent back sector and looks forward to early consultation.
