The letter is the second warning to lenders from the FSA in recent months. It comes in light of its earlier review which found weaknesses in arrears and repossessions handling, particularly in the impaired credit sector of the market, and the fact that increasing numbers of households are at risk of repossession.
Jon Pain, FSA retail managing director, said in the letter: "Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for sometime. In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers, including when they go into arrears."
"The fair treatment of consumers in arrears will continue to be a priority for the FSA throughout 2009. Where we find that lenders are not complying with our requirements we will make appropriate and properly targeted use of our existing regulatory tools, which may include enforcement action"
The letter states that the FSA expects the senior management of mortgage lenders and administrators to:
critically review current arrears policy;
critically review current management practices and procedures; and
assess whether, in practice, borrowers in arrears are being treated fairly by initiating a review of a sample of cases to assess whether the FSA’s requirements are being met.
The FSA expects firms to address any weaknesses as a matter of urgency.
Chief executives must communicate conclusions and any actions the firm proposes to take to the FSA by 31 January 2009.
