In response to our findings, and evidence from other supervisory work, in September 2010 we published proposed changes to complaints handling rules in CP10/21.22 We expect to publish a Policy Statement in this area in Q2 2011. As set out in the CP, we propose to:

• abolish the two-stage complaints handling process;

• require firms to identify a senior individual responsible for complaints handling; and

• set out how firms can meet existing requirements to undertake root cause analysis and have regard to decisions made by the ombudsman service.

We also propose increasing the ombudsman service’s award limit to \( \mathcal { E } \) 150,000 to reflect its fall in real terms since the limit was last raised.

Regulated firms currently report to us that they receive around four million complaints from customers each year. New rules now require firms to publish their own complaints data.

We published this firm-specific data for the first time in September 2010, enabling customers to compare and contrast the way firms deal with their complaints.

# 2.2 Unfair terms in mortgage contracts

A number of mortgage lenders have proposed, or taken, action in their standard mortgage contracts which is to the detriment of consumers. While firms may have prudential reasons for taking these actions, and may wish to balance the interests of savers and borrowers, they need to handle the whole process carefully to not breach FSA rules and principles (including Treating Customers Fairly) or the law.

Some firms are seeking to boost their revenues by including terms that move consumers from their discounted initial rate deal to the firms’ Standard Variable Rate (SVR) in particular situations. We have come across firms using terms to change a consumer’s mortgage to the firm’s SVR if the consumer breaches any of the conditions of the mortgage, regardless of the significance of the breach. This could result in the consumer paying a significantly higher interest rate than they had originally expected.

We have seen some lenders use contractual terms including terms that demand immediate repayment of the mortgage if, in their opinion, the consumer’s circumstances have only changed to a minor degree or the consumer has committed a minor breach of the terms and conditions of the mortgage. It would appear that such terms could give firms wide discretion to demand repayment of the mortgage, to the detriment of consumers.

To address these matters, we have published undertakings under the Unfair Terms in Consumer Contracts Regulations 1999 from firms agreeing not to apply such terms unfairly. We have also reminded firms with similar terms in their contracts of the messages contained in these undertakings.

# 2.3 Treatment of mortgage customers in arrears

As we showed in Chapter A, the combination of very low interest rates, an unemployment increase less than feared, and a fall in house prices less than some commentators had predicted has so far limited the impact of the financial crisis on homeowners. This has meant that after rising arrears and repossessions in 2008/9, numbers fell back slightly in the first half of 2010. Regulatory action to require appropriate forbearance has also had an effect.

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22 CP10/21 Consumer complaints: The ombudsman award limit and changes to complaints-handling rules, September 2010, The ombudsman service and FSA.