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FCA findings on long-term mortgage arrears

Mortgage application with a key Print publication

17/12/2018

The Financial Conduct Authority (FCA) has published its findings following its thematic review (TR18/5) into how lenders treat customers with long-term arrears (including the provision of forbearance measures).  Walker Morris’ Banking & Finance Litigation partner Louise Power explains the FCA’s findings and offer some practical advice.

Lenders’ management of long-term arrears

In its 2017/18 business plan, the FCA committed to reviewing the effect on customers with long-term mortgage arrears of lenders’ extended forbearance. The results of that review have now been published, and there are some very encouraging findings:

  • firms generally treat customers in long-term financial difficulties appropriately
  • there were many examples of firms agreeing reasonable arrangements with customers on suitable, sustainable terms, and of firms taking an appropriate approach to the consideration of customers’ individual circumstances
  • on a particularly positive note, some firms have introduced specific call handlers or designated sub-teams, which provide customers with a single point of contact and improve the overall customer experience
  • similarly, some firms have adopted ‘end-to-end’ reviews (that is, as opposed to reviewing calls or other incidences of customer interaction in isolation), which enable them to better evaluate the suitability of customer outcomes.

On a less positive note:

  • the FCA found instances of incomplete record keeping, which led to customers having to repeat their circumstances on multiple occasions. This can be hugely detrimental to customer experience and engagement
  • other barriers to effective engagement encountered in the FCA’s review arose where customers were required to completed detailed forms with little assistance in order to have their income and expenditure assessed and their vulnerabilities noted
  • in some instances, customer vulnerabilities were not identified at all, leading to inconsistent treatment of vulnerable customers
  • the FCA also noted some instances of inadequate reviewing of arrangements (that is, arrangements were not reviewed regularly and proactively so as to ensure that they remained suitable) and of a lack of consideration of alternative options
  • the FCA also discovered examples of customers receiving inaccurate information in their communications, which arose from lenders not reviewing correspondence before issue.

What can lenders do?

There is no doubt that money problems are a highly emotive issue and can cause wider-ranging problems if they are not effectively addressed.  Today, however, lenders and their professional partners can harness new and exciting technological innovations to help customers to get their finances under control. Secure platforms can provide digital income and expenditure forms that can be completed once by a customer, lender, law firm or intermediary and that can be shared safely via text, email or live chat, facilitating communication and document-completion via the customer’s channel of choice, on any device and at any convenient time and place.  Technology can also be used to set up and track payment plans; send alerts; enable customers to make payments; and more.  It can represent a ‘real time’, personalised, digital financial journey for the customer.  It can offer convenience, flexibility and enhanced, proactive financial management and control on an ongoing basis.

Effectively deploying available technologies is a practical step that lenders can take to remove some of the emotion and stress from customers’ interactions with financial institutions and their professional partners. It can therefore be an attractive option for customers who are particularly vulnerable or anxious.  The advantages for customers are clear, but so too are the advantages for lenders, who will benefit from happier and more solvent customers.

Technological innovations also offer enhanced efficiencies, which can allow for the appointment of more dedicated call/case-handlers and sub-teams (the benefits of which the FCA has specifically highlighted), and which can free-up more time for staff training. All that can, in turn, lead to improved rates of accuracy and significantly improved levels of customer service and satisfaction.

In his speech to the FCA’s Annual Public Meeting on 11 September 2018, Chair Charles Randell said that “Technology can obviously be enormously positive. It is now integral to delivering financial advice, products and services”.  Our view is that the deployment of innovative products and systems, which improve customers’ experiences and outcomes, is consistent with the general approach of the FCA and can help lenders to address the types of shortcomings identified in the FCA’s recent findings.

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