The review found that firms had improved practices, placing greater emphasis on the need to treat customers fairly, but the FCA has challenged firms to do more to deliver consistently good outcomes for borrowers.
The FCA reiterated the importance of firms making decisions that take account of the specific personal and financial circumstances of borrowers – and reminded firms to deal sensitively with borrowers who have particular vulnerabilities.
The regulator has also asked lenders to take action to identify customers susceptible to arrears if interest rates rise and have appropriate strategies to treat them fairly.
Clive Adamson, director of supervision at the FCA said: “Since we last looked at arrears management we have been pleased by the progress that firms have made. However, there is still work to do.
“Lenders need to treat customers in financial difficulty fairly. We want firms to take further action to strengthen their arrears management practices and invest in their systems and people to make sure that they get this right.
“We are already working with firms and trade bodies to help them embed a culture centred on delivering the best outcome for customers based on their specific circumstances.”
The FCA’s report calls on firms to build on the progress made by:
• better supporting and empowering front line staff to help them make appropriate decisions; and
• providing greater flexibility in their practices to support more tailored outcomes in the best interests of borrowers.
The review of mortgage arrears management forms part of the FCA’s wider strategy for improving standards in the mortgage market and reflects the FCA’s new forward looking, judgement-based approach to supervising firms.
The Council of Mortgage Lenders said it is pleased that the FCA's latest thematic review finds that arrears management has improved since the last time the regulator reviewed practices in this area.
The CML also welcomed the regulator's constructive approach to working with firms to encourage and help them to strengthen their approaches still further.
The CML's existing good practice guide for lenders, designed to help them meet the FCA's rules and requirements on arrears management, should also help support this aim. In line with the forthcoming changes to FCA rules coming in April following the Mortgage Market Review, the CML will be reviewing the guide to ensure that it is fully comprehensive and up-to-date.
CML head of policy Jackie Bennett said: "Like the FCA, we recognise how important it is to equip staff to make good decisions and work in ways that treat customers fairly. We will continue to work with our members through our guides, conferences, and training to ensure that good practice is developed and embedded within firms."
Paul Broadhead, head of mortgage policy at the BSA, said: “Tick-box arrears management is dead and buried, and has been for some time. The right approach hinges on lenders listening to a borrower’s circumstances and providing the most appropriate solution from the options available.
“This human approach enables lenders to respond to an individual’s needs but is grounded in a framework that ensures fair treatment across the board.
“Arrears at building societies are well under two-thirds of the level in the market as a whole reflecting their more personalised approach. However, societies recognise that every case of financial hardship represents a personal tragedy and the focus on delivering good and appropriate customer outcomes remains front of mind.”
