The Financial Conduct Authority (FCA) said it has not identified any widespread failings regarding how mortgage lenders treat customers in arrears, but the regulator adds that it has observed “some inconsistencies in firms’ arrears management practices.” The FCA warns that action against some firms may follow and is urging all firms that provide or administer mortgages to take on board the FCA’s findings and consider whether they need to make any amendments to their practices.

The FCA decided to examine this issue in detail as it had previously identified that there was a trend of increasing long-term arrears cases, whilst the number of homes being repossessed had been falling. Nevertheless, the FCA press release on the subject stresses that firms can only use re-possession of the customer’s home as a last resort.

As an example of the good practice it saw at some firms, the FCA says it has visited firms who have introduced specific call handlers or designated sub-teams. The regulator says that, by doing this, firms are seeking to “provide the customer with a consistent point of contact” and adds that this “improved the overall customer experience.”

The regulator says it is particularly concerned about firms putting in place forbearance arrangements which were unaffordable, and which had severe consequences for the overall financial situation of customers. The regulator adds it has seen cases where the debt continues to grow in spite of forbearance arrangements being put in place.

More specific examples of the poor treatment of arrears customers that the FCA saw at some firms included:

  • Incomplete record keeping, resulting in customers having to repeat their circumstances on multiple occasions to different members of staff
  • Failure to identify vulnerable customers
  • Failure to review agreed payment arrangements regularly to ensure they remained suitable for the customer
  • Inaccurate communications to customers regarding their situation
  • Failure to consider all repayment arrangements

Asking customers in arrears to complete detailed forms, with little assistance from firms, in order to have their income and expenditure assessed and their vulnerabilities registered, thus creating a barrier to effective engagement

The FCA press release also encourages customers who are experiencing financial difficulty to speak to their mortgage provider at the first sign of financial difficulty, thus making it easier for the firm to make appropriate arrangements. It also highlights that additional support and free, independent guidance is available from organisations such as the Money Advice Service.

Jonathan Davidson, Executive Director of Supervision at the FCA, said:

“We know that many customers remain hesitant to contact their lender to discuss their mortgage arrears for a variety of reasons. We encourage customers to talk to their lender as early as possible as this may give them more time and options when it comes to the steps they can take”.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article