Lenders should be named and shamed

Consumer watchdog Which? called today for the City regulator to name and shame lenders hitting those in mortgage arrears with exorbitant charges.

The group hit out at the Financial Services Authority's (FSA) refusal to identify lenders that it has found to be flouting rules on treating customers unfairly.

Dominic Lindley, principal policy adviser at Which?, said: “It’s effectively protecting the commercial interests of companies trying to evict people from their homes. How will lenders be persuaded to improve their practices unless the FSA names and shames them?”

The FSA is shortly due to appear before the House of Commons Treasury Select Committee, as part of its inquiry into mortgage arrears and access to mortgage finance. q

Which? had submitted a Freedom of Information request asking for the names of the lenders, hitting people in arrears with seemingly excessive charges, to be published. The lenders have been identified under the FSA's thematic review of this area.

The consumer group believes the this information should be submitted to judges hearing repossession cases and that the culprits should be fined. The revenue from these fines should be used to help borrowers access independent debt advice, it said.

However the FSA said: “On balance, the need to protect the firms’ commercial interests and the FSA’s efficiency and effectiveness in conducting and maintaining open and candid exchanges of information and views with firms outweighs the public interest in providing the information to you.”

Which? has also called for the Treasury committee to push through a number of other measures, including:

* forcing lenders to provide an itemised breakdown of the additional costs their arrears charges are supposed to cover;

* urging the FSA and Office of Fair Trading to review arrears charges, with “excessive” fees being automatically refunded to the consumer;

* suspending arrears charges if consumers have made agreements to pay off arrears;

* allowing borrowers in discussion with an independent debt advice agency a 90 day charge-free window in which to negotiate an arrangement for the repayment of arrears.

A seperate poll released earlier this week by the Financial Services Consumer Panel (FSCP) found that almost half of people having difficulties paying their mortgages do not seek advice, often because they feel their woes are not serious enough or do not know where to go for help.

The FSCP said there was an “urgent need” for more investment in information and advice.The panel, which advises the FSA on the interests and concerns of consumers, reminded lenders of their duty to help people in arrears and inform them about alternative sources of advice.

“I’m calling on all mortgage lenders to do more to encourage consumers in difficulty to get advice early, before the problem becomes a disaster for both parties,” said the chairman Adam Phillips.

Of those who did seek advice, two-thirds went to their mortgage lender, while one in four sought help from Citizens Advice. The panel urged consumers to not view debt advice agencies as a last resort.