The Financial Conduct Authority (FCA) has issued a consultation paper (CP16/16) on minor amendments to its Mortgages and Home Finance: Conduct of Business (MCOB) rules relating to mortgage borrowers with a payment shortfall. The changes relate to MCOB 12.41BR and the allocation of payments received from customers who are suffering a payment shortfall and an amendment to the glossary definition of 'payment shortfall'.

The proposed amendments are considered necessary as a result of the FCA's identification of divergent practices among firms when allocating payments received in such circumstances. The proposal is to clarify that, when a customer is suffering a payment shortfall, the firm must ensure that no part of any payment received from the customer is allocated towards paying un-capitalised interest or charges incurred because of a payment shortfall before the balance of the payment shortfall has been cleared. The proposed new wording is set out in the consultation paper.

For anyone wishing to respond to the consultation, the deadline is 10 August 2016.

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