Examination of Witnesses (Question Numbers
23 MARCH 2010
Q100 Jim Cousins: Just to follow
up on the GMAC situation, GMAC had a deal with Bradford &
Bingley to pass very considerable tranches of their mortgages
over to Bradford & Bingley and, rather remarkably I must say,
from my point of view, the Government continued to honour that
deal after Bradford & Bingley was effectively in government
ownership, and continued to pass huge quantities of these, particularly
buy-to-let mortgages, over to Bradford & Bingley right up
to February 2009. I wonder if you could just tell us, of the 46,000
mortgage customers that were assisted, how many of them were remaining
with GMAC now?
Ms Titcomb: I am afraid we do
not have that figure and we would have to write to you on that
Q101 Jim Cousins: Could it be that
a lot of those mortgage customers are now, in fact, mortgage customers
of a government-owned bank?
Mr Pain: I could not speculate,
Mr Cousins, in terms of the number, but there is a probability
that some of those customers, obviously, are part of
Q102 Jim Cousins: Could you let us
know what the number is?
Mr Pain: Yes, indeed. As Lesley
said, we are happy to.
Q103 Jim Cousins: I wonder if I could
ask this: did the FSA ever refer this issue of GMAC and its deal
with Bradford & Bingley up to the tripartite for a broader
Mr Pain: As you can imagine, at
that time there were a lot of deliberations between Tripartite
colleagues in respect of Bradford & Bingley. I do not recall
a specific conversation.
Q104 Jim Cousins: Could you check
whether any such reference was made, because there has not been
a lot of attention given to this but it is a remarkable story.
Mr Pain: We are happy to.
I suppose our view was that irrespective of the transaction between
GMAC and Bradford & Bingley, for whatever proportion of those
mortgage accounts that you have referred to, clearly our intention
was to take the appropriate action against GMAC for treating those
customers inappropriately in respect of arrears. That would have
happened in any event, whether it had been part of that arrangement
with Bradford & Bingley or any other institution.
Q105 Jim Cousins: Has there been any
discussion between the FSA and the tripartite authorities and
UKFI about the fact that we now have, in Bradford & Bingley,
an enormous stock of government-owned, buy-to-let mortgages, probably
one of the largest stocks of buy-to-let mortgages anywhere in
the country? The Government, in effect, is now the largest single
provider of buy-to-let mortgages. Has there been any discussion
about the possible macro significance of that?
Mr Pain: Obviously, you will appreciate,
from our perspective, I will answer your question in two narrow
ways, we, obviously, at this moment in time do not have any regulatory
responsibilities for regulating buy-to-let mortgages, per se,
but that debate
Q106 Jim Cousins: No, but the knowledge
you will have gained from all of this ought to have contributed
to some discussion of this issue amongst the tripartite authorities,
Mr Pain: I think, as you can imagine,
UKFI and other parties who are then responsible for the day-to-day
running through their shareholding in Bradford & Bingley do
look at all aspects of their business, including (and we would
still hold them responsible) their arrears management in terms
of the mortgage books they have, whether they be buy-to-let or
Q107 Ms Keeble: I wondered if you
could say what steps you have taken to deal with the whole issue
of the unacceptable arrears charges and, also, the administration
charges. Last time you came we had a discussion about a whole
range of different organisations.
Ms Titcomb: The first thing we
have been doing, as you will be aware, is that we have already
issued a formal consultation paper to change our rules in the
mortgage area to tighten up on, for example, the offers of forbearance
that institutions must make, and basically changing the language
from "may" to "must", making it very clear
that these are requirements on firms, which was clearly identified
as one of the most urgent things to pursue. That has been the
principal focus of our work. We are then, also, at the same time,
gathering data on the mortgage arrears charges that firms make
at the moment. We are analysing that data and we expect to say
more about that this year, in terms of what it shows us about
the spread of charges and so on. That will give us a baseline
for the future.
Q108 Ms Keeble: You are looking then,
are you, at some of the minor charges as well as the regular fees,
because if somebody is in financial difficulty and they have to
cough up a couple of hundred pounds for a home visit or something,
that can be the straw that breaks the camel's back, can it not?
Ms Titcomb: We are looking at
that. As you will be aware, the recent proposal also outlaws the
most awful of the charging practices that we have seen already:
multiple charges for representation of direct debits, that kind
of thing. So we have tackled some of those already and we will
be looking at the rest as well. We continue to do so as part of
our ongoing supervision of individual firms as well.
Q109 Ms Keeble: How many enforcement
actions have you taken then?
Ms Titcomb: You have seen the
decision that has been published so far on GMAC, and then there
are another seven firms in enforcement at the moment for a variety
of issues relating to arrears practices and charges.
Q110 Ms Keeble: What kind of practices?
Ms Titcomb: I can only really
talk about the one that has been published so far, which is the
Q111 Ms Keeble: I understand there
are issues about whether or not you want to name the firms but
it is the type of practiceswhat the things are that they
are being pursued forwhich is not going to identify them
but which I think it is extremely important that people know.
Mr Pain: I think you could probably
draw a fair conclusion that it is the same sorts of issues that
we have talked about when we talked about our review of specialist
lenders; that is where our focus of the mortgage arrears work
that we did last year was focused actually on, and much of that
was relating to the treatment then of consumers and whether they
were abiding by our appropriate
Q112 Ms Keeble: Yes, but what?
Mr Pain: The unfair handling in
terms of not treating consumers on an individual basis; rapid
acceleration towards repossession without considering other alternatives
for consumers; the charges issue that Lesley has referred to,
and a range of issues that relate around that whole basis of treating
customers who are in very delicate situations in a fair and even-handed
Q113 Ms Keeble: If you have seven
cases, and you have said lack of forbearance and too rapid escalation,
what specifically are the concerns there? Did they all fall under
those two categories?
Mr Pain: Those are the two broad
categories I am talking about, but the general treatment of consumers
in arrears and whether they handle them in an appropriate manner
is the basis on which our arrears work was focused. If we find
they have not treated them fairly, not given them the due forbearance
that you have talked about, not treated them as individuals and
accelerated cases in an inappropriate manner, then those are issues
that we would have with those firms. If their charges, as part
of that process, are inappropriate and compound that issue then
those are other issues.
Q114 Ms Keeble: You have said two
pointers and you have now thrown all of them into the melting
pot. What would be helpful to know is an anonymised sort of list
of what exactly the things are that you are taking enforcement
action over. They must be very specific sorts of complaints or
charges, or allegations, or whatever. I think it is important
to know so that we can know which are the weakest points.
Ms Titcomb: As you know, we do
not discuss the individual cases that we are pursuing.
Q115 Ms Keeble: Yes, you do not mention
the names of the firms (and I think one of my other colleagues
will probably be pressing on that). I am not asking for the names
of the firms, I am asking for what the things are that they did
Mr Pain: I am happy to think about
how we can do that and achieve your objectives, as you say, recognising,
at this stage, before the other changes, we have to remain anonymous
about the individual firms we are talking about. However, I think
if you looked at the issues that we identified with GMAC (and
we made that very public at the time they were fined and the whole
redress process), the spectrum of issues that we identified with
GMAC are the similar issues we have identified with other firms.
Q116 Ms Keeble: I am sorry, it is
not about the spectrum of issues because we have discussed at
great length, both at this session and previously, what the spectrum
of issues is, it is what the specific cases are that you are taking
enforcement action over. What would be helpful to know would be
exactly what those are, not which the firms are but exactly what
the cases are and what the complaints are. Otherwise, we do not
know what the problem is, apart from there is just a general issue
there, when we all know there is a general issue there.
Mr Pain: As I say, I think we
have gone beyond talking about general issues. As I say, if you
looked at the GMAC case, there are specific issues that are identified
Q117 Ms Keeble: Can you give us a
list of the specific issues, the specific cases, that you are
dealing with and what the allegations are about what the companies
have done wrong without mentioning the company's names (I understand
that is a difficult issue that my colleague will go into) so that
we know exactly what the problems are that you are looking at?
Mr Pain: Yes, I would be happy
to write to the Committee and try and set those out.
I do not think, if I am being frank, they will tell you any more
than I have already indicated. You will see in the GMAC case,
or you will see at the time we actually published the results
of our review back in mid-2009 about our review into lending practices
Q118 Ms Keeble: It will tell us what
these specific seven cases are. That would be helpful. You have
talked about the work stream that you are doing, and I wondered
what the timeline is for that concluding and for you coming up
with some new proposals.
Mr Pain: On the arrears charges?
Q119 Ms Keeble: Yes.
Mr Pain: We have a package of
measures that we have talked about in respect of the Mortgage
Market Review, so we have got some policy interventions that we
are talking about, and we did say to this Committee last time
we were here we wanted to accelerate some issues as a priority.
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