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UK news - Debt Action Forum SCOTLAND produces a report, UK Insolvency Service produces a new guide to debtors and debt advisors, and the FSA produces its annual report and toughens up with higher fines and enforcement in clampdown on poor mortgage arrears handling

On 2nd July 2009 the Insolvency Service launches its new guide to debtors and debt advisors, entitled ‘In Debt? Dealing with your creditors.’ The guide contains an overview of the main debt solutions, not just those administered by the Insolvency Service, and addresses what we believe to be a gap in the literature currently available to debtors from all sources.
The guide includes the following:
• A summary of the key features of the main statutory and non-statutory debt solutions;
• An overview on how each one works;
• The pros and cons of each solution;
• Where to obtain further help and information.

The guide has been produced in conjunction with the IVA Standing Committee, which includes representatives from many sectors of the insolvency world, including debt advice organisations, creditor bodies and insolvency practitioners. The Insolvency Service has also consulted with other organisations, including Government, regulatory and charitable organisations, and we are grateful to them all for their valuable input.
The Guide is unbiased, easy to understand, factual and independent and the intention is to enable the debtor to make an informed decision. However, the guide is not intended to be a substitute for getting independent expert advice.
The guide is now available on the Insolvency Service website, and may be accessed via our website at: where it can be downloaded.


FSA publishes Annual Report for 2008/09

24 June 2009

The Financial Services Authority (FSA) today published its Annual Report for the year 2008/09.
The report details how the FSA performed during the year against its statutory objectives and how it has delivered outcomes for both firms and consumers under the three headings which cover all the FSA's work: to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
In his introductory statement, Lord Turner, chairman of the FSA, said that since mid 2007, confidence in the global banking system has suffered a dramatic collapse and clearly this has implications for finance ministries, central banks and regulators.
Lord Turner said:
"The year 2008/09 has been an extremely difficult one for regulators across the world. Looking at the year as a whole, I believe the FSA has dealt successfully with the immediate crisis, and taken actions to ensure that we build a more stable financial system for the future."
In his report the FSA chief executive Hector Sants summed up the year by saying:
"It is critical to understand that the individual firm problems we have seen emerge in the last year had their origins in the boom, and were not reversible in the current market conditions. Our objectives in the past 12 months have been to minimise the impact of these weaknesses and to lay the foundations of a more effective and better regime for the future. I believe we have made good progress in extremely difficult conditions in pursuit of these goals.
"I hope we have begun the process of rebuilding confidence in the system and the regulator by demonstrating that we are an organisation that is willing to learn and that we have the ability to change radically. I believe enduring and respected organisations are forged in times of adversity and that this will ultimately be seen as such a time for the FSA."
The key element of radical change has been the implementation of the Supervisory Enhancement Programme. In this respect the key points are:
• The increase in the supervisory staff from 526 to 703;
• The FSA began changing the authorisation process for Significant Influence Functions (SIFs) to ensure it was judging the competence and regulatory knowledge of senior people at firms as well as their probity;
• The FSA reorganised and strengthened its risk identification and mitigation capacity;
• The FSA revised its supervisory risk assessment framework to include greater focus on business models; and
• The FSA increased its engagement with auditors and investors to emphasise their role in the oversight of firms.
Appendices to the report, also published today on the FSA website, provide further statistical information on the FSA's work during the year. This includes:
• The FSA's enforcement division closed 302 investigations during the year resulting in 371 outcomes. Of these, 243 concluded with the use of powers (such as prohibition, financial penalties and variations of permissions) and 128 without the use of powers. 30 of these 128 outcomes were private warnings.
• The FSA levied £27.3 million in financial penalties during the year compared to £4.4 million last year and prohibited a record 58 individuals from carrying out regulated activities compared to 30 the year before. This reflects the FSA’s more proactive approach to enforcement - the credible deterrence philosophy - set out last year.
• Of the 59 targets the FSA set itself for 2008/09, 39 were delivered on schedule. Of the other 20, 10 were re-planned but still delivered in the 2008/09 financial year and 10 are still to be delivered.
• The number of regulated firms decreased from 28,325 to 27,340.
• The number of approved persons decreased from 172,077 to 166,420.
• Page 79 of the Report sets out details of the remuneration of FSA Board members.
Adair Turner's total remuneration for the period 20/09/08-31/03/09 was £246,546, made up of salary of £219,000 and benefits totalling £27,346. Hector Sants’ total remuneration was £623,170 (2007/08: £661,948). This comprised salary of £478,000 and other benefits totalling £145,170. He declined to take his bonus award of £130,000.


FSA/PN/080/2009, 22 June 2009

The latest review from the Financial Services Authority (FSA) has found continued weaknesses in the way specialist lending firms and third party administrators are handling mortgage arrears and repossessions.
Four firms have been referred to enforcement for investigation and several more firms are being assessed for referral. In many cases the FSA found a high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules. All firms investigated will be required to take action to remedy failures identified in the arrears review.
This action comes as new data on mortgage lending, published today by the FSA, shows the number of consumers facing arrears and repossessions continues to increase. It also follows two warnings by the FSA last year that failing to treat customers in arrears fairly was unacceptable. The warnings were set out in an earlier survey of arrears handling and in a letter sent to the chief executives of all mortgage lenders and administrators.
The latest review focused on specialist lenders to the impaired credit market who are no longer lending, and on third party administrators (TPAs) contracted to handle mortgage arrears and repossessions work on behalf of lenders. It also looked at arrears charges and the treatment of borrowers whose mortgages have been securitised.
The review found that poor practice was still prevalent among specialist lenders and TPAs including:
• operating an approach focused too strongly on recovering arrears without reference to the borrower's individual circumstances;
• being too ready to take court action;
• imposing arrears-related charges unfairly; and
• specialist lenders not exercising sufficient oversight of contracted TPAs.
And it identified terms in securitisation covenants which could lead to inequitable treatment of borrowers in arrears, by restricting the scope for the lender to exercise flexibility and forbearance, for example by prohibiting an extension of the loan term, or conversion to interest only for a period.
Lesley Titcomb, FSA director responsible for the Mortgage Sector, said:
"In current market conditions, with our data showing more people struggling to meet their mortgage payments, it is vital that firms treat customers who get into arrears fairly. It is unacceptable that some firms are applying fees unfairly and pushing customers towards repossession without considering alternatives. The steps we are announcing today demonstrate that proper handling of arrears is still a high priority for us and will continue to be so until the necessary progress has been made.
“The focus of today’s report was specialist lending but the messages apply equally to other mortgage firms. As a result of the Dear CEO letter sent to all lenders and lenders and administrators last November, follow up action is underway with a number of firms and the industry as a whole can expect continued intensive scrutiny of its arrears handling processes."
To help firms with their mortgage and repossession handling, the FSA has outlined some examples of good and poor practice.
The FSA understands that customers in arrears are a vulnerable group who need help and advice. It has a wide range of mortgage material on the Moneymadeclear website, including the "What to do when you can’t pay your mortgage" guide, which offers practical help for people who are struggling with mortgage repayments. The FSA requires firms to send this guide to consumers who fall into arrears. Consumers who are having difficulties meeting mortgage payments should talk to their lender immediately and may also wish to contact a free independent advice agency. If a borrower believes they have been treated unfairly by their mortgage lender, they should pursue their complaint through the firm’s internal complaints procedures. If they are not satisfied with the firm’s response, they may refer the complaint to the Financial Ombudsman Service.
The arrears review is part of the FSA’s ongoing programme of work designed to monitor the effectiveness of its regulation of mortgage lending, to address key issues in the mortgage sector and to ensure that consumers are treated fairly and can make informed decisions. The issues identified during the review are being factored into the FSA’s comprehensive Mortgage Market Review on which a Discussion Paper is due to be published in September.
Notes for editors
1. Impaired credit history means at the time of the new loan application the borrower had: arrears of three months or more on a previous loan in the last two years; County Court Judgements over £500 in last three years; or is subject to a bankruptcy order or Individual Voluntary Arrangements at any time in the last three years.
2. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
3. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

ID: 43419
Author(s): iff
Publication date: 07/07/09

Full official Scottish Government response to the DAF report

Link to 1

Link to 2

FSA refers firms to enforcement in clampdown on poor mortgage arrears handling

FSA good and poor practice in mortgage and repossession handling

UK Financial Services Authority Annual Report

Link to page "In debt - dealing with your Creditors"

Created: 07/07/09. Last changed: 07/07/09.
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