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Last Updated: Saturday, 23 February 2008, 15:03 GMT

Courts missing regulator's rules

By Paul Lewis
BBC Radio 4's Money Box

A lawyer
There are claims some lawyers are not aware of the FSA's rules

Some judges do not make sure lenders follow the correct procedure before they repossess homes of people in mortgage difficulties, a consumer group claims.

Lenders have to follow rules laid down by the Financial Services Authority.

But the Financial Services Consumer Panel says some do not and wants judges to refuse possession orders unless they do.

Judges say they do encourage lenders to follow the spirit of the rules.

They are not being introduced into court proceedings because lawyers are not aware that the FSA has these rules
John Howard, chairman of the FSCP
Rush to Repossess

John Howard chairman of the Financial Services Consumer Panel (FSCP) told Money Box on Radio 4:

"Our information is that those rules are not always being taken into account when lenders go to court.

"And we have had some suggestion that lenders, particularly in the sub-prime [high risk] sector, are rushing to court to get people out of their homes to get their money back, and not following the proper processes the FSA says they should."

FSA rules

The rules say that lenders must:

  • Make reasonable efforts to reach agreement on repayment of the debt.
  • Adopt a reasonable timescale for the debt to be repaid.
  • Not put pressure on the customer to come to an unreasonable agreement.

    They also say lenders should only go for repossession where all else has failed.

    FSA rules are not part of the law of the land
    District Judge Michael Tennant, chair of the District Judges Association

    But John Howard says the courts are often unaware that those rules have not been followed before possession is sought.

    "They are not being introduced into court proceedings because lawyers are not aware that the FSA has these rules.

    "It is not that long [since] they came into existence, so lawyers don't know about them and advice workers don't know about them.

    "And homeowners certainly won't."

    Judges' response

    One judge admitted that many of his colleagues were not aware of the FSA rules.

    But District Judge Michael Tennant, chair of the District Judges Association, disagreed.

    He told the programme:

    "FSA rules are not part of the law of the land.

    "District Judges try as far as they are able to encourage the operation of the spirit of the FSA rules."

    John Howard, of the FSCP, thought they could go further.

    "We have been told it is possible for judges to take those rules into account.

    "If you have got an aggressive lender who is going in fast to get repossession without going through the proper stages, the judge will say 'have you followed these steps?' and if they have not then a possession order is not granted until they have."

    BBC Radio 4's Money Box was broadcast on Saturday, 23 February 2008 at 1204 GMT.

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