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Tuesday, 4 October 2011

Excessive Mortagage Arrears Fees?

Following my recent post on excessive arrangement fees, it's worth noting that the FSA recently meted out a £630,000 fine for excessive arrears charges to Swift 1st Limited - the fifth such lender since a review in 2010. Swift will also have to pay about £2.35 million to redress the problems.

The FSA found that "Swift applied certain charges to its customers’ accounts... which ... did not reflect a reasonable estimate of the cost of administering an account in arrears."

The list of adverse practices is quite long, and worth comparing against your own mortgage statement or that of any client who has suffered arrears. However, you'll need to go back over all the old statements - the Swift practices dated back from June 2007 to July 2009...

The fees "were:

  • Arrears management fee: a monthly management fee applied to a customer in arrears;
  • Default notice fee: a default fee applied when a customer’s account fell into arrears;
  • Unpaid mortgage payment fee: applied when a cheque, direct debit or standing order was not honoured by a customer’s bank; and
  • Litigation fees: fees applied to customers’ accounts when Swift started legal proceedings."
"In addition:
  • Swift applied excessive early repayment charges to the redemption figures of customers who were, or had been, in arrears;
  • Swift failed to send all its customers in arrears certain prescribed documents, providing information on the options available to them;
  • Swift focussed on the collection of arrears without always proactively engaging with customers to establish an appropriate “Arrangement To Pay” based on their individual circumstances; and
  • Swift also failed to have adequate systems and controls in place to deal with early redemptions which resulted in some customers who redeemed their mortgages overpaying."