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Consumer duty
The new ‘consumer duty’ sets higher and clearer standards of consumer protection across financial services. It requires firms to put their customers’ needs first. This is known as a new Principle 12. Firms have been required to apply the duty to new and existing products and services from 31 July 2023. If the consumer duty applies, to set a higher and more exacting standard of conduct, Principle 12 replaces:
    Principle 6 – a firm must pay due regard to the interests of its customers and treat them fairly;
    Principle 7 – a firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
The rules can be viewed at fca.org.uk/publication/policy/ps22-9.pdf and the non-Handbook guidance at fca.org.uk/publication/finalised-guidance/fg22-5.pdf. The FCA has also published a ‘Dear CEO’ letter on implementing the duty in the debt advice sector.1fca.org.uk/publication/correspondence/consumer-duty-letter-debt-advice.pdf
Key expectations of conduct under the consumer duty are explained further through cross-cutting rules.2FCA, The cross-cutting rules set out how firms should act to deliver good outcomes for customers The cross-cutting rules require firms to act in good faith, avoid causing foreseeable harm and enable and support retail customers to pursue their financial objectives.
 
2     FCA, The cross-cutting rules set out how firms should act to deliver good outcomes for customers »
Mortgages and Home Finance: Conduct of Business Sourcebook
The FCA’s Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB) is useful to look at when dealing with a mortgage debt case if the loan is a regulated mortgage agreement.
Of particular use is MCOB 13 (arrears, payment shortfalls and repossessions: regulated mortgage contracts and home purchase plans). It covers important areas such as:
If the mortgage was made on or after 31 October 2004 (or for second secured loans, after 21 March 2016), it may be regulated by the FCA. If so, the lender is required by the MCOB to deal ’fairly’ with borrowers in arrears and have a written arrears policy and procedures. This should include:
    providing clients with details of missed payments, the total amount of arrears, the outstanding balance due, any charges incurred to date, an indication of possible future charges and a copy of the current MoneyHelper’s information sheet Mortgage arrears or problems paying your mortgage;5moneyhelper.org.uk/en/homes/buying-a-home/mortgage-arrears-if-you-have-problems-paying-your-mortgage
    making reasonable efforts to come to an agreement with the client about repaying the arrears;
    liaising with an adviser or agency if the client arranges this;
    allowing a reasonable time for repayment, bearing in mind the need to establish, where feasible, a practical repayment plan for the client’s circumstances (in appropriate cases, arranging repayments over the remaining term of the mortgage);
    granting the client’s request for a change to the payment date or method of payment (unless the lender has a good reason for not agreeing to this);
    if no reasonable repayment arrangement can be made, allowing the client to remain in possession of the property to enable it to be sold;
    repossessing the property only where all other reasonable attempts to resolve the situation have failed.
The lender must take into account the client’s circumstances and consider whether it is appropriate to agree to:
    extend the term of the mortgage;
    change the type of mortgage – eg, repayment mortgage to interest-only mortgage;
    defer interest payments;
    capitalise the arrears;
    make use of any government mortgage rescue initiatives.
If arrears have been capitalised and rescheduled over the remaining term of the mortgage, they are no longer arrears and so cannot be relied on as the basis for starting a repossession claim. If a client does not pay the full monthly contractual instalment, the lender must allocate the payment in a way that minimises the arrears (which should have the effect of minimising the default interest and charges).
The lender should also have given the client certain prescribed information as above. In addition, many mortgage lenders do not seek possession until payments of mortgage interest are three, or even six, months in arrears.