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The FSA set out a package of measures that will help to ensure that mortgage holders in arrears are treated fairly and which reinforces the FSA’s tough stance in its battle against mortgage fraud.

The key arrears proposals:

• Make plain that firms must not add early repayment charges on arrears charges and interest levied on those charges;
• Clarify that firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears;
• Compel firms to consider all options for borrowers.  Repossessions should always be the last resort;
• Confirm that payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later; and
• Oblige firms to record all arrears handling telephone calls and to keep all records for three years.