Mortgage arrears: follow up - Treasury Contents

Examination of Witnesses (Question Numbers 100-119)


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 particular point.

  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.[1]

  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 consideration?

  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.[2] 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, surely?

  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 residential mortgages.

  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 GMAC one.

  Q111  Ms Keeble: I understand there are issues about whether or not you want to name the firms but it is the type of practices—what the things are that they are being pursued for—which 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 manner.

  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 wrong.

  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 there.

  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.[3] 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.

1   Ev 73 Back

2   Ev 73 Back

3   Ev 72 Back

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