Lenders can turn new arrears rules to their advantage

Written by Payplan on Friday 23 July 2010

The regulator’s latest changes to the way lenders should treat customers in arrears – particularly the requirement for lenders to consider all options before starting action to repossess a property – are to be welcomed.

In my experience, mortgage arrears need to be dealt with in the context of the overall financial situation of borrowers.

In trials in which we are working with a small number of lenders to talk to clients in arrears, we have found that by engaging with borrowers about their whole debt situation we’re nearly always better able to effect a solution that stabilises and makes their repayments on unsecured debt more manageable.

This leaves a greater proportion of income available to put towards improving the arrears situation.

So without having to run the risk of giving advice, lenders adopting a more holistic approach to arrears can turn the FSA’s rules to their advantage and put more borrowers back on the straight and narrow.

They can also fulfil their obligations with regard to Treating Customers Fairly.

So lenders should see the new rules, rather than being a burden, as a chance to tackle underlying unsecured debt liabilities at source and free up disposable income for the repayment of arrears.

John Fairhurst

Managing Director

Payplan

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