Consumer complains after being rejected a payment deferral on their mortgage

Mortgages Financial Difficulties Covid-19

Raj was experiencing some financial difficulties. He’d fallen into arrears on his mortgage because he couldn’t afford the full monthly payments. Raj contacted us when his mortgage lender refused a payment deferral.

What happened

Raj was experiencing some financial difficulties because his employer had reduced his hours. He’d fallen into arrears on his mortgage because he couldn’t afford the full monthly payments.

A couple of months later, Raj’s employer had to stop trading because of the Covid-19 lockdown and Raj was furloughed, reducing his income further.

Raj contacted his mortgage lender to ask for a payment deferral but his lender refused because Raj was already in arrears. 

Raj then contacted us to complain because he didn’t think this was fair or in line with guidance the Financial Conduct Authority (FCA) had issued to lenders at the start of the pandemic. He said because the deferral had been refused he’d tried to pay what he could but it had been very difficult. The lender said that it didn’t think Raj was eligible for a deferral because of the arrears.

What we said

We looked at Raj’s situation and the history of his mortgage. We noted that the FCA’s guidance said that lenders should offer payment deferrals to borrowers whose finances were impacted by the pandemic – as Raj’s were. This included borrowers in arrears, unless a payment deferral was clearly not in their interests, which we didn’t think was applicable in Raj’s case.

We told the lender to restructure the mortgage as if the payment deferral had been granted and to amend Raj’s credit file so that it didn’t show a worsening position during the deferral period. We said it should use the payments Raj had made during the deferral period to reduce the pre-existing arrears. And it should work with Raj to offer tailored support, in line with the guidance, once the deferral ended.

We also awarded Raj compensation for the distress and inconvenience that had been caused. Taking into account the impact on Raj at the time, we thought £250 was fair.