The Report notes that in late 2007 the FSA first became concerned that some mortgage lenders were failing to treat their customers fairly when they fell into mortgage arrears, but that it was not until June 2009 that the FSA announced it was taking enforcement action against four firms.
The Report criticises the seemingly leisurely approach of the FSA in terms of completing its mortgage arrears review and enforcing possible breaches in the mortgage arrears rules. It calls upon the FSA to spell out clearly in its forthcoming review how it will improve its performance in terms of bringing miscreant firms to book.
The Report also deals with the naming of miscreant firms. Currently the FSA only publishes the names of firms it has found guilty of wrongdoing once enforcement action against the firm has been concluded. The Report notes with concern that the balance between disclosure to the public and the need to protect firms before they have been found guilty of wrongdoing may have tilted too far towards the interests of the industry.
John McFall, Chairman of the Committee said: "I am shocked at the length of time it is taking the FSA to complete enforcement action against firms it suspects are breaking the rules. During this time many thousands of consumers will have suffered detriment and some will have lost their homes. The FSA must raise its game on the enforcement front and demonstrate that it can take action speedily and decisively where wrong doing is taking place.
I am concerned by the FSA's reluctance to name firms whom it is taking enforcement action against. It suggests that the FSA is more interested in protecting lenders who are treating their customers unfairly and that it is placing the interests of lenders above those of consumers. We call upon the FSA to shift this balance towards consumers and believe that a failure to do so would be taken as evidence of the FSA's cosy relationship with the industry."
The Financial Services Authority (FSA) responded to the report by saying that it is "currently conducting a wide-ranging review of all aspects of its mortgage regulation and will be publishing proposals this autumn.
The review of everything from securitisation to arrears is based on establishing precisely what went wrong in the mortgage market and fixing those problems - as well as ensuring there is a sustainable market for the long term.
The FSA continues to take a robust position with firms as soon as we have evidence of wrong doing and also to ensure borrowers are treated fairly throughout the lifetime of their mortgage.
With sale and rent back, and any new areas of scope, the FSA will bring its sanctions to bear against firms that break the rules as well as tackling unauthorised business.
The FSA will respond in full to the Treasury Select Committee's report in due course."
