Regulation  

FCA steps in over ‘unfair’ terms on 6,000 Kensington loans

Kensington Mortgage Company has agreed with the Financial Conduct Authority that it will not enforce “unfair” terms in its agreements for clients that took out loans through Money Partners Ltd.

The FCA has published a ‘notice of undertaking’ which details an agreement not to enforce “a number of terms” in the Money Partners Ltd mortgage conditions booklet 2004.

The regulator said this is because it had concerns that the terms were likely to be unfair under its consumer contracts regulations. In particular, the FCA felt that the “terms provided the firm with too much discretion”.

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The FCA believed the terms allowed the firm to demand full repayment of the outstanding mortgage immediately if there was failure to pay a single monthly payment or any other money was due, if any term was breached, and if there was a change in customers’ circumstances.

The terms also allowed the lender to raise a customer’s monthly mortgage payments in the event that the original monthly mortgage payments were found to be insufficient to clear the debt by the end of the mortgage term.

Kensington also acknowledged that two of its terms were not expressed in “plain, intelligible language”, the regulator said.

The new terms that will be applied set out clearly that Kensington may demand immediate repayment of the debt if the customer:

• has failed to make payments under the mortgage and the amount unpaid is at least equal to two monthly payments;

• is in breach of particular obligations relating to the property and the customer has failed to remedy that breach within a reasonable period;

• obtained the mortgage as a result of fraud; or

• took a mortgage as joint borrowers, and both or all die.

Kensington, part of Kensington Group, and MPL had an agreement under which MPL would assign certain mortgages it originated to Kensington, following their completion.

In 2012, the Financial Services Authority said it will in future publish more agreements that are reached with providers over unfair contract terms, following a spate of undertakings being published.

In March 2012, the regulator published details of an agreement with Cheshire Mortgage Corporation Limited, which agreed to change terms used in its 2004 and 2006 mortgage contracts after the FSA ruled that they “may be unfair.”