FCA says 750,000 mortgage customers could get compensation payout

Hundreds of thousands of mortgage customers could be in line for compensation.

The Financial Conduct Authority (FCA) said its work with an industry group had identified a "likely" breach of industry rules.

The watchdog said it believed lenders had been collecting arrears over the remaining mortgage term through a higher monthly payment while continuing to pursue the money as immediately payable through their collections processes.

It believes around 750,000 customers may be affected by the issue of lenders automatically lumping arrears balances in with customers' monthly mortgage payments.

Any money due back is likely to run into the low hundreds of pounds in most cases, with those affected to be contacted directly.

But the FCA added that anyone hit with higher credit costs as a result of the problem could receive a larger sum.

Jonathan Davidson, the FCA's director of supervision, warned enforcement action could be taken to deal with any unfair behaviour by firms.

He said: "Even (Taiwan OTC: 6436.TWO - news) if inadvertent, automatic capitalisation of arrears can lead to poor customer outcomes and firms need to put this right, and make sure the practice stops.

"Customers do not have to take any action at this stage, as firms will contact them directly.

"Firms should start identifying affected customers immediately and not wait until the finalised guidance is published."

The FCA has given lenders until June next year to conclude that work.