FSA Gets Tough On Homeowner Loan Providers August 28th, 2008
There are a large number of home owners living in the UK today who would like to be able to pay a lump sum off their mortgage or homeowner loan or even repay it altogether, along with many more individuals who would equally like to be able to re-mortgage to a new provider to obtain a better deal on their loan.
Sadly many of these people are unable to fulfil their wishes due to the high level of exit penalties which would be charged on the redemption of their existing loan and many borrowers are unsure of the actual level of charges levied on their particular loan, as the lender has the right within the contract to alter the amount charged depending on circumstances.
The Financial Services Authority (FSA) is now starting to clamp down on a number of lenders who operate variable exit fees on their homeowner loan products.
The financial regulator claims that almost one in three lenders is not following FSA guidelines regarding exit charges, which goes against the principles of good practice, as laid down in their statement of January 2007 and is in breach of the “treating customers fairly” directive.
The FSA is writing to those lenders concerned and expects them to amend their loan contracts and has threatened severe action against any who do not comply.
The FSA said in a statement “We expect lenders to amend or delete the terms in new contracts and not to rely on them in contracts with existing customers. If necessary, we will take further regulatory action. We will continue to monitor closely whether firms’ terms comply with the law and principles set out in the statement. Should it come to our attention that a firm’s terms do not comply, we will consider the extent of the breach and what appropriate action to take. This may include, if sufficiently serious, enforcement or court action.”