MCOB 13.3 Dealing fairly with customers in arrears: policy and procedures

The requirement in MCOB 13.3.1 R(2) for a written policy and procedures is intended to ensure that a firm has addressed the need for internal systems to deal fairly with any customer in financial difficulties. MCOB 13.3.1 R(2) does not oblige a firm to provide customers with a copy of the written policy and procedures. Nor, however, does it prevent a firm from providing customers with either these documents or a more customer-orientated version.

In relation to using reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall or sale shortfall1, customers:

1. (1)

   should be given a reasonable period of time to consider any proposals for payment that are put to them; in addition, and depending on the individual circumstances, a firm may wish to do one or more of the following in relation to the regulated mortgage contract or home purchase plan1 with the agreement of the customer:

   1. (a)

      extend its term1; or

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   2. (b)

      change its type1; or

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   3. (c)

      defer payment of interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall)1; or

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   4. (d)

      treat the payment shortfall as if it was part of the original amount provided1;

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2. (2)

   should be given adequate information to understand the implications of any proposed arrangement; one approach may be to provide information on the new terms in line with the annual statement provisions1.

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In relation to using reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall or sale shortfall, a mortgage lender1 should not automatically capitalise arrears.

In relation to adopting a reasonable approach to the time over which the payment shortfall or sale shortfall should be repaid,1the FSA takes the view that the determination of a reasonable repayment period will depend upon the individual circumstances. In appropriate cases this will mean that repayments are arranged over the remaining term.

In relation to granting a customer's request for a change to the payment date, a term that purported to allow a firm to change the payment date unilaterally might in any event contravene the Unfair Terms Regulations.

Firms that propose to outsource aspects of customer relationships (including collection of debts or any other sums due1) should note that and SYSC 8,2 a firm cannot contract out its regulatory obligations and1 the FSA will continue to hold them responsible for the way in which this work is carried on.

The record referred to in MCOB 13.3.9 R should contain, or provide reference to, matters such as:

1. (1)

   the date of first communication with the customer after the account was identified as being in arrears;

2. (2)

   in relation to correspondence issued to a customer in arrears, the name and contact number of the employee dealing with that correspondence, where known;

3. (3)

   the basis for issuing tailored information in accordance with MCOB 13.7.1 R;

4. (4)

   information relating to any new payment arrangements proposed;

5. (5)

   the date of issue of any legal documents;

6. (6)

   the arrangements made for sale after the repossession (whether legal or voluntary); and

7. (7)

   the date of any communication summarising the customer's outstanding debt after sale of the repossessed property.

For details of the standard expected of firms in relation to maintaining records, see MCOB 2.8 (Record keeping)