Mortgage Sector (Hansard, 7 March 2000)

§ Mr. Sheerman
To ask the Secretary of State for Trade and Industry what steps he is taking to protect vulnerable consumers from high levels of commission rates charged by non-status lenders in the mortgage sector. [112778]

§ Dr. Howells
The Office of Fair Trading published guidelines for lenders and brokers in the non-status market in 1997 include guidance on lenders commission structure and disclosure of brokerage and other fees payable by the borrower. The Director General of Fair588W Trading has indicated that lenders and brokers who do not comply with the guidelines risk licensing action under the Consumer Credit Act 1974.

§ Mr. Sheerman
To ask the Secretary of State for Trade and Industry what protection his Department provides to mortgagees in respect of the penal rates charged to consumers by mortgage lenders who fall behind in their payments. [112777]

§ Dr. Howells
If a mortgage loan is a regulated agreement under the Consumer Credit Act 1974, the lender cannot charge interest on arrears, when the borrower defaults, at a rate which exceeds the contractual rate of interest. The Act also contains provisions, not restricted to regulated agreements, which enable consumers to apply to the courts to have their credit bargains re-opened if they are extortionate. One of the factors the courts can take into account when considering whether a credit bargain is extortionate is prevailing interest rates at the time the agreement was made. Among other remedies, the court is able to alter the terms of the credit agreement or order the creditor to repay sums paid under the agreement to the borrower.
The Unfair Terms in Consumer Contracts Regulations 1999 provide that terms in standard form consumer contracts (other than terms about price or the subject matter of the contract) are not binding if they are unfair, and enable the Director General of Fair Trading and others to bring injunction proceedings before the courts.

§ Mr. Sheerman
To ask the Secretary of State for Trade and Industry what guidance his Department gives to mortgage lenders on appropriate levels of charges to their customers. [112780]

§ Dr. Howells
None. However, the Director General of Fair Trading's guidelines for non-status lenders and brokers require charges on default to be reasonable and do no more than cover the lender's administrative costs. The Director General has also issued guidelines under the Unfair Terms in Consumer Contracts Regulations 1999 which say that it is unacceptable for lenders to vary interest rates at will unless consumers can end the contract immediately and without penalty.