Cold-calls from companies selling mortgages are still a big problem, despite the ban on them imposed by the Financial Services Authority (FSA), and the lack of enforcement action is allowing illegal cold-calling activity to flourish. There is evidence that consumers are still being phoned about mortgages without their prior permission by companies with whom they have no previous relationship. I have gone on the record in this magazine and others calling for the FSA to crackdown on the practices of many of my competitors. The rules concerning mortgage-related customer contact are contained in MCOB 3 Financial Promotions. They are pretty categorical.
Under MCOB rules, a telephone call made to a customer is deemed to be a ‘real-time financial promotion’ and, according to MCOB 3.7.3, ‘a firm must not make an unsolicited real-time qualifying credit promotion unless the customer has an established existing customer relationship with the firm and the relationship is such that the customer envisages receiving unsolicited real-time qualifying credit promotions’.
Furthermore MCOB 3.7.1 states that: ‘a person is not to be treated as expressly requesting a call, visit or dialogue because he omits to indicate he does not want to receive any further visits or calls to engage in further dialogue; or because he agrees to standard terms that state such visits, calls or dialogues will take place unless he has signified clearly that, in addition to agreeing to the terms, he is willing for them to take place.’
Basically, it shouldn’t be assumed that by not signing a declaration the customer is consenting to be contacted. The customer’s written and signed consent to being contacted is needed. If you are an adviser you should also provide a prominent line in the customer’s factfind documents’ declaration and signature section to the effect that they confirm that they may be contacted.
But this is not all; once a company has gained the ongoing customer relationship there are further requirements to be met.
The communication must be clear, fair and not misleading; no untrue claims are to be made; there should be identification of the purpose of the communication and firm represented; if not previously agreed, the recipient’s wish to continue the contact should be checked (and stop the communication if the recipient does not wish to proceed); and communications should be at a sociable hour.
Pretty clear and concise all that, but many companies are obviously unwilling to work to the rules – there are literally dozens of them still making calls to consumers despite this activity being severely curtailed by the FSA’s above-outlined regulations.
Flouting the rules
I would not contest that the number of ‘out-of-the-blue’ calls has reduced, in other words calls from companies with no link whatsoever to the consumer. That number has reduced dramatically and, anecdotally, there appears to be little, if any, of this activity. However, there are hundreds of thousands of calls made every month that flout the rules and, while not out-of-the-blue, merely pay lip service to the ban.
For example, some companies are engaged in the practice of phoning consumers, supposedly about secured loans, but then switch the conversation to one about mortgages. But the most common infringement is organisations contacting customers from whom they have had no explicit consent for ongoing communication.
The seriousness of the problem cannot be over-exaggerated given that the companies who are diligently sticking to the FSA rules, such as Vesta, are at a distinct disadvantage. Why are we playing by the rules, when so many others are not? How can competition within the sector be fair when so many companies aren’t working to the same rulebook?
It might even be said that the situation is worse than it was before the cold-calling ban, because at least then the industry knew where it stood and there was a level playing field. We could all cold-call and knew no rules would be broken.
Now rules are broken, but very little seems to be done to the companies that break them. While I have read about FSA activity in a variety of contexts, I have not heard much about them forcing a company to stop making certain types of contact, or of them taking action against a ‘cold-calling’ company.
Several cases have come to light since the ban – and not all of them have come from the smaller lenders and IFAs – that must be the tip of a very large iceberg. It seems that no action has been taken in response to any of them. It is interesting to focus on an issue covered extensively early last year that concerned the Halifax.
Keith Miles, an IFA with Monmouthshire Financial Services in South Wales, found that every client he had placed with Halifax over the previous 12 months had been contacted by the company trying to sell them other products.
He claimed that the bank contacted the clients before any declaration form had been signed by the customer to announce whether or not they wished to hear directly from the Halifax.
Mr Miles said Halifax General Insurance Services had contacted one of his clients within 24 hours of him processing an online application form, in an attempt to sell house and contents insurance without any declaration actually being signed.
He argued that although paper copies of the application allowed his client to say no to marketing of other products by the company, there was no opportunity to do so online.
At the time the FSA said that unless a client had instructed the adviser that they wished to be contacted by a provider’s salesforce, ‘these sorts of calls should not be taking place’.
One might argue that if the larger lenders, with their high public profile, feel they can engage in such activity without much risk, then it is understandable that so many smaller firms and organisations are actively engaged in it.
‘Do Not Call’
As mentioned, there appears to be little punitive action from the FSA at the present time. Perhaps, the best that we can hope for is that cold-calling will gradually disappear.
What could emerge is something like the environment that currently applies in the US where a ‘Do Not Call’ (DNC) climate has been in place for some time.
There, some 90 million people have signed up to the national ‘Do Not Call’ registry, so the financial services sector has had to evolve new techniques.
The top five strategies for intermediaries, according to surveys in the US, are:
Referrals where a client advises a friend he should do business with you.
Public seminars where attendance is solicited by mailing or advertisement. The major benefit here is the immediacy of results. If someone is not converted three weeks after the seminar, it is unlikely they will ever be.
Introductions and networking where the financial adviser can target the high net-worth individuals they want to cultivate and meet them socially or be introduced through mutual friends.
Business hours cold-calling. Because many of the best prospects have opted out of the cold-calling world via DNC, they obviously cannot be called on their home telephones or mobiles. However, calling a business is not barred. The challenge is getting through though.
Lunch or dinner where the financial adviser invites a couple of clients to a fine restaurant. The clients are asked to bring a colleague, neighbour or friend and the group is usually no larger than 10 to 12 people.
The US experience seems to show that companies have adapted to the new environment. Successful firms have developed strategies that reach their target audience in new ways and these new techniques have, by their nature, made existing relationships with clients deeper.
Instead of being able to call a client unsolicited every few years, to check whether they are in need of financial advice, companies will have to check-in with them on a more regular basis. By having to get their prior and ongoing permission to keep in contact, the relationship can only get better. This will be to the benefit of the lender or intermediary as well as to the good of the client.
Regular client contact is the Achilles Heel of some advisers. If cold-calling rules help redress this, they will have succeeded in achieving something that countless other initiatives have not.
