Mortgage arrears and charges
Do you handle customer complaints for a mortgage lender about arrears and charges? This page will give you an overview of the complaints we can help with and how we approach them.
We publish separate guidance on our approach to complaints about:
On this page
Do you have a mortgage complaint?
Complaints we deal with
Consumers come to us when they believe their mortgage lender has:
- applied unfair charges to their account, such as arrears fees, legal costs and field agent visit fees
- wouldn’t agree to a concession they asked for, like a temporary switch to interest-only, or a term extension
- the lender is unfairly trying to repossess their house
- they can’t afford their payments and the mortgage company won’t help
- the lender is harassing them about their arrears
Rules on mortgage arrears and charges
When we look at complaints about mortgage arrears and charges, we use the regulatory and legal standards that applied at the time of the event the consumer is complaining about.
The Mortgages and Home Finance: Conduct of Business (MCOB) sourcebook sets out how mortgage lenders should provide services to borrowers, covering regulated:
- mortgage contracts (including first and second charge mortgages and bridging loans)
- equity release products
- home purchase plans, and
- sale and rent back agreements
Handling mortgage complaints before they come to us
Good complaint handling can repair a relationship, build confidence in financial services, and help customers understand your financial products.
We'd expect your complaint handling teams to fully understand:
- all the relevant rules and regulations, including the requirements of the Consumer Duty
- what to send us when we're dealing with a complaint about your firm
Our decisions database holds all the final decisions we’ve published since 1 April 2013. They're anonymised to protect the identity of complainants but are based on real-life complaints, so will give you a good picture of how we resolve disputes.
Our complaints data will give you an idea of the volume of complaints we receive and resolve, and the proportion that we have upheld in consumers’ favour.
How we resolve complaints about mortgage arrears and charges
We only look at complaints you've had an opportunity to look into first. If the consumer is unhappy with your decision, or you don't respond to them within the time limits, they can come to us.
Each case is different, so what we require will vary. But we’ll look at the facts and evidence from both you and your customer. We’ll usually consider:
- relevant laws and regulations
- regulators’ rules in place when the event happened, including the Consumer Duty
- guidance, standards and codes of practice in place at the time of the event
- whether you carried out any additional work in the months that charges were applied, and if so, what this was – for example, trying to engage with the borrower to collect payments or offer forbearance
- whether your customer made any payments to the account while it was in arrears – and how big the payments were
- the number of charges you’ve made and why you think they’re reasonable
- the amount of communication between you and your customer
- whether your customer’s situation is likely to improve
- the terms and conditions of the mortgage
- the tariff of charges and whether it set out how much you charge for handling accounts in arrears
- what caused your customer's financial problems
- how your customer plans to get their mortgage back on track and whether that's realistic
If your customer told you they’re struggling, we’ll check that you:
- responded fairly and constructively – and without delay
- took your customer’s circumstances into account, rather than using a ‘one size fits all’ approach
We may ask additional questions or for specific information, for example, to explore whether your firm complied with the Consumer Duty.
In all cases, it’s important to listen to what your customers say, and to think about the right way to assist them as their circumstances change.
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Sometimes, when someone moves from one employer to another, the payment date of their salary can change.
In those circumstances, we would expect to see that you had allowed your customer to change the date of their monthly mortgage payment.
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Your customer might contact you because they’re going to be off work for a while due to illness. They know their income will fall during this time.
While your customer’s recovering, you could agree to:
- a reduced payment plan, or
- interest-only repayment arrangement
The shortfall will become agreed arrears and can be recorded on the consumer’s credit file. You can look at a payment plan for arrears once the customer is well.
Usually, you should waive arrears fees during this time – as long as the customer keeps to any reduced payment arrangement.
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When a relationship breaks down between two people who have a joint mortgage – and one moves out of the property – the remaining customer may not be able to afford the mortgage.
To support your customer, you could:
- agree to a reduced payment plan or change to interest-only repayment
- refer the customer to a debt charity
The shortfall will become agreed arrears and is usually recorded on the customer’s credit file. You could also review the interest rate, or perhaps extend the term to see if that would make the mortgage affordable.
But ultimately, if the customer can’t afford the mortgage, they will need to sell the house.
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Your customer tells you they have lost their job, so their household income is significantly reduced.
To support your customer, you could agree to a reduced payment plan or change to interest-only repayment, reviewing the situation every few months.
The shortfall will become agreed arrears, and this will normally be recorded on the consumer’s credit file. Usually, you should waive arrears fees during this time – as long as the customer keeps to any reduced payment arrangement.
If the customer doesn’t go back to work for some time, the level of arrears may mean that you have to think about repossessing the property.
If the customer can go back to work, look at a payment plan for arrears. If the customer can’t afford this, you could also look at extending the term.
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Your customer lets you know that they can’t go back to work because of chronic illness or permanent injury. This means they can’t afford their mortgage.
To support your customer, you might find a way to make their mortgage affordable. For example, you could look at:
- changing their interest rate, or
- increasing the mortgage term
If that’s not appropriate, while your customer considers their options, you could:
- change the payments to interest-only, or
- agree to a reduced repayment plan.
If there’s enough equity in the property, you might agree to waive mortgage payments while they sell the house. Usually, you should waive arrears fees during this time – as long as the customer keeps to any reduced payment arrangement.
We follow the FCA’s dispute resolution rules (DISP) and will take into account how you’ve tried to put things right.
We wouldn’t normally say a charge was too high, or that you weren’t entitled to apply, it if the charge:
- was allowed within the terms and conditions of the mortgage
- was set out in the tariff of charges
- took into account your costs in dealing with accounts in arrears
But we may think it wasn’t fair for you to apply the charge, even though you were entitled to. That will often be the case where the customer pays what’s been agreed, either under an arrangement or their full monthly payment.
If we uphold a consumer's complaint, we'll tell you what you need to do to put things right. We may also ask you to compensate them for any distress or inconvenience they’ve experienced as a result of the problem.
Case studies
‘It wasn't fair to charge me arrears fees’
Mortgages
'My lender won't agree to my repayment proposals'
Mortgages
Business Support Hub
Businesses and consumer advisers can contact our Business Support Hub on 020 7964 1400 for information on how we might look at a particular complaint, or for guidance on our rules and how we work.
We also work with businesses and other organisations to help prevent complaints.
