Inconsistent fees for borrowers in arrears

Research carried out by has discovered a vast inconsistency on penalty fees. For example, borrowers with Northern Rock and Accord will be given one month’s grace for a missed payment, but GMAC will automatically charge £50. Additionally, Coventry Building Society charges £20 for a returned cheque or direct debit, while Halifax and BM Solutions charge £35 – £15 more.

Louise Cuming, head of mortgages at, said: “While I would not condone missing a mortgage repayment often financial hardship is caused by circumstances outside the control of the borrower, such as a relationship split. It is fair to say those in the unfortunate situation of going into arrears can expect to face some highly punitive and unjust charges.

“We must question if these lenders are ‘treating customers fairly’ given the inconsistency of the penalty fees charged. Under the Mortgage Conduct of Business rules, regulated by the Financial Services Authority, all cases of financial hardship must be treated sympathetically. My biggest concern is that, in most cases, it will cost a borrower to be treated sympathetically. I understand lenders are not charities, but if they automatically burden customers with more fees and more debt no one wins. It may make better sense to assess each situation on an individual basis and make moves to help them repay the money they owe when appropriate.”

Some particularly unfair fees include: a fee of £35 for every letter or call regarding arrears, (as practiced by Halifax) and especially the charge made for getting advice on how to deal with the debt, such as the £100 for debt counselling charged by Halifax and GMAC.

Even worse for this most vulnerable section of the borrowing community, some lenders such as Barclays and Abbey don’t even offer an advice service for the borrower at all; their only suggestion is that the borrower seeks independent advice. Lenders that appear quick to agree the mortgage are not so quick to help when their customer is most in need.

Cuming continued: “Interest rates are rising and its impacting homeowners - recent data from the Council of Mortgage Lenders (CML) points towards an increase in properties taken into possession. People struggling to make their repayments who might be heading into this territory are particularly vulnerable, and it is important lenders meet their ‘treating customers fairly’ requirement.

“People will not realise the extent of the fees – the biggest outrage is that some lenders even charge for even debt counselling which can be found free, for example, with the Citizens Advice Bureau (CAB). In principle, this should be offered at no cost from the lender. Not only this, but I am sure customers are unaware, that with some lenders, they will be charged for every call and letter they receive.