There is a tone of disappointment and frustration in the FCA’s recent findings from its thematic review into the management of long-term mortgage arrears and forbearance.
What is perhaps more interesting is that the broad themes it draws attention to are similar to those seen in other sectors of the retail market, such as replacement investments and pension transfers.
Its statements that it has previously taken action against firms where it has identified poor practice and weak oversight, and that it continues to be prepared to take action where it finds evidence of poor practice, came in the same week we learned the average FCA fine levied on individuals in 2018 almost trebled to £186,000 from £63,000 last year.
While the senior managers regime is not due to come into force for the majority of advice firms until December 2019, the regulator is certainly flexing its muscles. As at June 2018, five senior managers, 10 certified persons and 128 approved persons were under investigation by the FCA.
But turning back to the subject matter of this article. The FCA’s Business Plan detailed its wish to better understand whether consumers in long-term mortgage arrears were experiencing harm specifically from extended forbearance.
The FCA is clear the following points are central to a good arrears and forbearance programme:
- The primary aim of forbearance should be to enable complete recovery of the mortgage through full repayment of the arrears.
- Payment arrangements agreed with customers should be reviewed regularly.
- Customer vulnerabilities must be identified and handled appropriately.
- Firms must act in such a way that is likely to keep the customer engaged.
- Quality assurance should look at the end-to-end process, not isolated elements of it.
The report also states areas of positive findings, including a small number of firms having adopted a quality assurance approach focused on broader end-to-end reviews.
However, the FCA was disappointed with its negative findings, particularly as it has previously issued detailed guidance on good and poor arrears management around customer engagement, quality assurance and customer vulnerabilities.
It highlights concerns with:
- Incomplete record keeping, including file notes containing insufficient information, resulting in customers having to repeat their circumstances on several occasions.
- Inaccurate communications with some customers receiving inaccurate information.
- Inconsistent handling of vulnerable customers.
- Inadequate reviewing of arrangements to ensure they remain sustainable and suitable for the customer.
- Lack of consideration of other options.
- Narrow quality assurance processes reviewing calls in isolation rather than considering the end to end process the customer has been taken through.
- Barriers to engagement, such as customers being required to complete long, detailed forms with little assistance from the firm.
Readers will recognise how similar these issues are to those we have seen before and are very consistent with findings in other products areas, such as pension transfer advice. Hence why senior managers in all sectors should take note: the regulator is showing signs of losing patience.
Simon Collins is managing director, regulatory, at Eversheds Sutherland