Assorted than 750,000 people have had arrears lumped in with their monthly mortgage yments, base the industry watchdog.
It means customers can take longer to y off debts or on oneself inappropriate fees, said the Financial Conduct Authority (FCA).
At the same mores, firms continued to pursue customers for arrears, demanding they were get revenge oned immediately.
The practice – known as automatic capitalisation – is not trans rent and can harm nib yers, added the watchdog.
For example, customers could have been hit with grave credit costs such as needing to service a yday loan or a put card debt because of the situation they were put in by their mortgage lender.
Mortgage arrears should merely be added to re yments if the lender has considered the individual circumstances of a customer and has their concurrence, according to the FCA.
Lenders have now been ordered to identify customers who experience been affected by the policy.
The FCA is now consulting on new guidance on the treatment of customers with mortgage yment arrears.
Jonathan Davidson, steersman of supervision – retail and authorisations at the FCA, said: “Even if inadvertent, automatic capitalisation of arrears can conduct to poor customer outcomes and firms need to put this right, and dream sure the practice stops.
“Customers do not have to take any action at this level, as firms will contact them directly. Firms should start categorizing affected customers immediately and not wait until the finalised guidance is let something be knew.”