All mortgage lenders and administrators have been given until the end of January next year to see that all mortgage customers are being treated fairly; this is the FSA‘s second warning to lenders on the back of its earlier review which revealed problems in the handling of arrears and repossessions.

“Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for sometime.” said Jon Pain, the FSA’s retail managing director, in his letter to mortgage lenders. “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 FSA has asked that lenders critically review their current arrears policy, and assess whether, in practice, customers are being treated fairly.

In instances where the FSA finds that lenders are not complying with the requirements, it will use the regulatory tools which it has at its disposal, “which may include enforcement action.” the letter said.

The Building Societies Association says that it welcomes the FSA’s request to ensure that customers are being treated fairly.

Adrian Coles, director general of the BSA said that “with arrears forecast to increase over 2009, it is essential that all lenders ensure that their arrears and repossession policies treat customers fairly.”

However, he added, “it is vital that borrowers who have, or believe they may be about to have, repayment difficulties contact their building society as soon as possible. If they do so, they will find a sympathetic welcome and advice to help them stay in their home.”

Lenders are already undertaking the requirements outlined by the FSA, according to the Council of Mortgage Lenders (CML), as stipulated in the CML industry guidance which was published last month.

The CML shares the FSA’s concerns about ensuring that “not only policies, but also practices “on the ground”, treat customers fairly and avoid repossession wherever an alternative solution can be found.”

“Lenders understand that in the current difficult economic environment there is bound to be a high level of scrutiny of their handling of mortgage arrears.” said CML director general Michael Coogan.

“Borrowers facing difficulty deserve to know that their lenders have the right measures in place to treat them fairly and try to help them keep their homes wherever this is an achievable outcome. That is why we and our members have been working on a voluntary basis to the same goals as the FSA in this important area.”

The British Bankers’ Association has also pledged to cooperate with the FSA’s request, on behalf of the UK’s banks, which “promise to deal sympathetically and positively with any customers in financial difficulty.”

© Fair Investment Company Ltd