Andrew Kay – the Head of Department, Retail Lending 1, Supervision, Retail and Authorisations Division at the Financial Conduct Authority – has written a Portfolio Letter to the boards of directors of mortgage third party administration firms.

The letter explains that some of the key areas of concern for the FCA, concerning these firms, are:

  • Customer treatment
  • Operational resilience
  • Financial resilience

Regarding the treatment of customers, the letter says:

  • Firms are failing to pay due consideration to the needs and challenges of vulnerable customers, which is possibly leading to them receiving less favourable outcomes than other customers
  • Firms are not adequately assessing customers’ needs, and that this could mean they don’t receive appropriate forbearance when in financial difficulties
  • Customers are not receiving fair resolutions to their complaints
  • Customers are being incorrectly pursued for debts

Regarding operational resilience, the letter says some firms do not have sufficiently rigorous oversight arrangements to prevent incorrect notifications or demands for payments being issued to customers

Regarding financial resilience, the letter says firms must closely monitor their financial health through cash flow forecasts, and ensure they have sufficient financial resources at all times. If a firm is forced to exit the market in a disorderly manner as a result of its financial situation, this could disadvantage customers who would then not be provided with clear and sufficient information about the status of their mortgage.

The letter also reminds firms that:

  • Under the Senior Managers & Certification Regime, they should have completed their assessment of the fitness and propriety of all individuals carrying out Certification roles on or before March 31 2021
  • They have a duty to disclose to the FCA anything of which the regulator would reasonably expect notice. As an example, the letter refers to the situation “when a firm’s business model is subject to change that would have a significant impact on the firm’s risk profile, resources or consumers.”