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Simon Collins: Repeated conduct failings stretching FCA’s patience

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.

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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.

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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

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There are 2 comments at the moment, we would love to hear your opinion too.

  1. The regulator is losing patience, their losing patience, the mess is mostly created in the first place by their guidance. This is very simple, bring back the rules which can be unforced, not guidance which every party can and does interoperate differently.

    As an IFA and x-banker I cannot but wonder how long the regulators can continue to blame everyone for failings they have in part created over the last 30 years. The regulator will not issue bending rules as if followed the regulator becomes liable. Why if you know what you want and need to happen would you not issue rules? Guidance is not worth the paper its written on and hindsight can always be applied.

    If you complete any forms for the client, they then state that’s not what they said, which is why they need to complete them and you should not help. Why are the forms so long and complicated, because of regulation and legal requirements.

    The lender is a business, requires payment, but eventually will claim against their security if not paid. This is not rocket science, its basic common sense. What further frustrates the issue is that if the lender does not complete every step of the process under The Credit Consumer Act correctly, within stated time limits, it loses the right to proceed to claim, which I am sure the FCA has not taken into account. They are only looking at the poor client that is in arrears and not what might be causing to problems in the first place.

    No lender wants to claim against its security, its complicated, costly and a mind field.

    • Interoperate is a real word, though I wonder if you don’t mean interpret. And what is a mind field?

      Completing forms for a client can be risky, though I always provide a copy with a firm instruction that the client should check it carefully and let me know of anything that looks amiss.

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