RegAlert2016-10-18
Added · Updated
FG17/4: The fair treatment of mortgage customers in payment shortfall: impact of automatic capitalisations
Residential mortgage lenders and administrators must review whether they automatically included payment shortfall balances in contractual monthly instalment calculations since 25 June 2010 and provide remediation for affected customers. The guidance establishes a framework requiring reconstitution of mortgage accounts where automatic capitalisation resulted in an additional monthly payment greater than £10, while accounts with increases of £10 or less require only a recalculation excluding the shortfall. Firms must conclude all remediation programmes by 30 June 2018 and update credit reference agency records to reflect corrected payment histories. Compensation for identified losses includes refunds of incorrectly charged fees and interest, plus simple interest at 8% per annum on excess payments.
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Finalised guidance
FG17/4 - The fair treatment of mortgage customers in payment shortfall: impact of automatic capitalisations April 2017 Financial Conduct Authority Page 1 of 21 Contents Definitions for use with this finalised guidance 2 1.Executive summary 3 2.Finalised guidance introduction 6 3.Finalised guidance 8
Annex 1: Remediation framework 15
Annex 2: Remediation framework – ‘How to’ guide 17
Guidance Finalisedconsultatio guidancen
Financial Conduct Authority Page 2 of 21
Definitions : these definitions are for use with this finalised guidance only and are not relevant to the FCA Handbook When we say What we mean Contractual Monthly Instalment (CMI) recalculation Recalculating the customer’s CMI, excluding any payment shortfall balance. This would mean, unless any additional payments are made to reduce the payment shortfall, at the end of the mortgage term, the payment shortfall would remain outstanding. Reconstituted CMI The CMI as it would have been if no payment shortfalls had been included in the balances used to automatically calculate CMI during the review period. Reconstituted payment shortfall balance The payment shortfall balance as it would have been if payments made by the customer in excess of the reconstituted CMI had been credited against the payment shortfall balance as they were made. Reconstitution (of a mortgage account) Restatement of the CMI and payment shortfall balance as they would have been if no payment shortfalls had been included in the balances used to automatically calculate CMI during the review period. The restatement involves calculating a reconstituted CMI and a reconstituted payment shortfall balance. Additional payments The increase of CMI that is attributable to the automatic inclusion of the payment shortfall balance in the CMI calculation. Mortgage balance The total amount owed by the customer (including any payment shortfall balances) on their mortgage account or sub-account of their mortgage.
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Source: Financial Conduct Authority — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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