Repossession and Mortgage Lenders Who Act Unfairly
Some borrowers may feel that they have been treated unfairly by their lenders. When threatened with losing one’s home through repossession it can feel as if the whole world is against you. This is not true and there are many organisations that can offer support and help for borrowers facing repossession proceedings.
Most lenders make efforts to treat their borrowers fairly – to do otherwise would be severely damaging to a company’s reputation and would be contrary to the industry guidelines for mortgage lenders. However, there may be times when a lender does not act towards a borrower as they should. Industry guidelines and rules can give borrowers an indication of what they can expect from their mortgage lender.
The Council of Mortgage LendersThe Council of Mortgage Lenders supports the principal of treating borrowers fairly. All companies regulated by the Financial Services Authority (FSA) have an obligation to treat their customers fairly and the FSA issues guidance on what companies should do to satisfy this requirement. The guidelines provided include the requirement to provide appropriate information and advice to customers and to provide products and services which are suited to the individual customer. Companies should also have an accessible complaints procedure for when things go wrong.
The Mortgage Repossession Pre-Action ProtocolPre-action rules apply to mortgage repossession cases. These require mortgage lenders to provide information to borrowers about their arrears and make efforts to actively engage with borrowers to resolve an arrears problem before starting a repossession case. These rules encourage lenders to be patient with borrowers who are in difficulties and to treat repossession as a last resort. Mortgage lenders who fail to comply with the pre-action rules may find it harder to get a possession order. Therefore, it is in a mortgage lender’s interests to act fairly towards borrowers before starting a repossession case.
Mortgages: Conduct of Business RulesThe FSA has set out a list of rules which apply to mortgages dated 31st October 2004 onwards. These rules replaced previous guidelines contained in the Mortgage Code. The rules describe how mortgage lenders should attempt to reach an agreement with borrowers for the repayment of mortgage arrears without going to court. Both parties to the mortgage are encouraged to speak to each other in order to resolve problems. The rules also state that lenders should not unreasonably refuse any request by a borrower to change the due date for mortgage payments.
Failure to comply with the Conduct of Business rules for mortgages could form the basis of a valid complaint to the Financial Ombudsman Service. However, a mortgage repossession case may already have started before such a complaint has been made or concluded. The Mortgage Pre-Action Protocol includes a requirement that a mortgage lender should think about delaying the start of a mortgage repossession case when a complaint has been made to the Financial Ombudsman. However, the lender does not have to postpone a case and therefore it is quite possible that a possession order could be made before any complaint regarding unfairness has been dealt with.
Taking Action Against Mortgage Lenders who Act UnfairlyProving that a mortgage lender has acted unfairly may not be easy. Going through the internal complaints procedure of a company can be a long and frustrating process, which may leave a borrower back at square one once it has been completed. The Financial Ombudsman Service deals with complaints about mortgage lenders but, again, this can be a long process. As stated above, there is no strict obligation on a mortgage lender to delay the start of a repossession case simply because a complaint has been made.
The Courts’ Approach to Lenders who Behave UnfairlyIf a borrower comes to court for a repossession hearing and tells the judge that they have a grievance against their mortgage lender, the judge could take this into account when deciding whether to grant a possession order and what sort of possession order to make. However, a complaint that a borrower has been treated unfairly will not necessarily amount to a defence to a possession claim.
A judge may decide to adjourn a case so that more information can be provided about the alleged unfair behaviour. However, if the judge ultimately decides that the behaviour does not amount to a defence this could simply lead to a delay in the procedure and an increase in the costs that have to be paid. As ever with mortgage repossession cases, borrowers must carefully weigh up the potential costs of a delay in the case against the ultimate benefit that may be derived from it. If a judge will still ultimately make a possession order, it may not be worth incurring the costs of an adjournment.