Content Options

Content Options

View Options

MCOB 12.4 Arrears charges: regulated mortgage contracts2

MCOB 12.4.1RRP
  1. (1)

    A firm must ensure that any regulated mortgage contract that it enters into does not impose, and cannot be used to impose, a charge for arrears on a customer except where that charge is a reasonable estimate of the cost of the additional administration required as a result of the customer being in arrears. 1

  2. (2)

    Paragraph (1) does not prevent a firm from entering into a regulated mortgage contract with a customer under which the firm may change the rate of interest charged to the customer from a fixed or discounted rate of interest to the firm's standard variable rate if the customer goes into arrears, providing that this standard variable rate is not a rate created especially for customers in arrears.


The imposition of a charge for arrears on a customer who is adhering to an arrangement under which the customer and the firm agree that the customer will make payments of a set amount per month (or other agreed period) on agreed dates may be relied upon as tending to show contravention of MCOB 12.4.1R (1)3


When a customer has a payment shortfall in respect of a regulated mortgage contract, a firm must ensure that any payments received from the customer are allocated first towards paying off the balance of the shortfall (excluding any interest or charges on that balance).3

MCOB 12.4.2GRP

A firm may calculate the same level of arrears charges for all regulated mortgage contracts where the customer is in arrears, rather than on the basis of the individual regulated mortgage contract with the particular customer.

MCOB 12.4.3GRP

Firms are also subject to requirements on information provision and standards relating to arrears and repossessions (see MCOB 13 (Arrears and repossessions)).