The Financial Conduct Authority (FCA) has issued a consultation entitled The fair treatment of mortgage customers in payment shortfall: impact of automatic capitalisations. The FCA is concerned that some mortgage lenders, when recalculating borrowers’ monthly instalments, have included any payment shortfalls within the sums to be paid over the remaining term of the mortgage. The FCA considers this practice to be a form of “automatic capitalisation”, in breach of MCOB rules and proposes that lenders who have recalculated borrowers’ monthly instalments in this way since 25 June 2010 identify affected customers and provide them with redress in circumstances where their monthly instalment increased by more than £10 as a result of the “automatic capitalisation”.

The FCA is proposing that mortgage lenders notify all affected customers by 30 June 2017 and conclude their remediation programmes within the following 12 months. Responses to the consultation should be submitted by 18 January 2017.