By Ketki Saxena
Investing.com -- In a recently released directive, the Financial Consumer Agency of Canada (FCAC) has urged financial institutions to provide additional support to consumers grappling with escalating mortgage payments and increasing living costs.
"FCAC's research shows that homeowners with a mortgage are increasingly at risk of experiencing financial hardship, such as having to increase their borrowing for daily expenses or to draw on their savings," said Frank Lofranco, deputy commissioner of supervision and enforcement for the agency.
The FCAC refrained from recommending any particular measures but insisted on guiding lenders towards practices that would alleviate the financial stress currently faced by many consumers. This could include waiving prepayment penalties or internal fees and charges, abstaining from charging interest on interest, and extending loan amortization for as brief a period as possible.
The federal watchdog also highlighted the need for protecting vulnerable borrowers when renewing their mortgages. It warned against lenders attempting to exploit these at-risk individuals by offering less favorable rates based on their inability to modify their mortgage credit agreement or transition to other lending institutions.
"We have a lot of confidence in financial institutions adhering to the guidelines," Lofranco noted, but assured that "If enforcement action is necessary because we've seen there to be a violation of a consumer protection set out in legislation and regulation, we will pursue that appropriately and, where warranted, undertake enforcement action"
The guidelines take effect immediately.
No end date has been mentioned, but the FCAC says it will "monitor the economic environment and adjust our regulatory approach as appropriate."