Mortgage intermediaries should be under no illusion that the Financial Services Authority (FSA) means business as far as its ‘Treating Customers Fairly’ (TCF) regime is concerned.
Every time a press release is issued or a speech made by a senior representative of the FSA, TCF is invariably referred to as one of the regulator’s key priorities.
The credit crunch will only act to strengthen the FSA’s resolve to see though the implementation of this initiative. At a time when credit is more difficult to secure and an increasing number of borrowers are at risk of facing financial difficulties, the FSA is inevitably going to want to see lenders and intermediaries doing everything possible to provide their clients with sound advice.
The regulator has, for example, recently announced the launch of a £2 million campaign to help consumers make informed financial decisions. It will be looking for everyone in the industry to support the campaign by treating their customers fairly.
Hector Sants, chief executive of the FSA, recently told the financial services industry: “You should not seek to divert your attention away from focusing on conduct of business requirements and our high level principles.
In particular, you will need to continue the focus on TCF and tackling areas of financial crime. Senior management should engage to a greater extent to ensure that firms are making the right judgments in delivering the outcomes we want to achieve.”
If lenders and brokers don’t tow the TCF line, then they can expect harsh punishment and hefty fines. The FSA will not only be willing to show that it has got teeth, but that it’s also willing to use them.
Key deadlines
There are two key TCF deadlines in 2008 and one of them is already upon us. By the end of March, all firms must have appropriate management information or other measures in place to test whether they are treating their customers fairly.
By the end of December 2008, all firms must have completed their work on TCF and be able to demonstrate that they are consistently treating their customers fairly.
The end of March deadline is now here and, if you are a mortgage broker, your firm must have management information in place to test whether you are treating customers fairly.
Take, for example, customer complaints. It isn’t good enough simply having a customer complaints register. What the FSA will want to see is evidence as to what you have learnt from the complaints and what steps you have taken to ensure similar problems do not occur again.
You must be able to show that your business has done everything possible to treat customers fairly when something goes wrong and that you have tried to ensure they do not encounter similar problems in the future.
The same principle applies to the end of December deadline. By the end of the year you must have completed all your work on TCF and be able to demonstrate that you are consistently treating your customers fairly.
That doesn’t mean simply being able to put a tick in the box against all the TCF requirements; it means being able to provide tangible evidence that your firm has been consistently embedding TCF within its day-to-day operations.
Becoming second nature
2008 is the year when TCF needs to become second nature and the philosophy underpinning everything your firm does. The principles which underpin the TCF regime will help engender confidence among your clients and, believe it or not, could be one of your greatest strengths next year. Don’t think of TCF as being an administrative burden; it can deliver tangible benefits.
At the Mortgage Business Expo event last year, Gillian Cardy, chartered financial planner at Professional Partnerships, said firms had to take the time to ensure TCF is ‘business as usual’ before the end of December 2008 deadline.
She said: “Firms must break down every single element of their contact with their clients to come up with a step-by-step approach to embedding TCF. This means looking at all levels of client contact. Advisers should try to put themselves in the position of someone who doesn’t know the jargon or the products.” This is good advice.
If you want guidance with TCF, speak to your network if you’re an appointed representative or, if not, you should visit the TCF website at www.tcfinfo.co.uk.
Any adviser who hasn’t visited the TCF website should do so immediately, because it contains clear and easy to understand guidance, useful hints and tips and helpful case studies. Since the recent relaunch of the site, the number of registered users has doubled and there has been some very positive feedback.
If, for example, you’re still struggling with the TCF management information requirements, go to the TCF Info website and click on ‘Tips and Tools’. On the sub-menu click on ‘Management Information’ and you’ll find a list of self-explanatory headers: ‘Getting started’, ‘Management Information checklist’, ‘Key principles’ and ‘Case studies’.
To read through all four sections will take no longer than 10 minutes and, having done so, you will have a pretty good understanding not only of what the TCF management information requirements are all about but, most importantly, how to implement them.
Likewise, you can find comprehensive information on the website about TCF planning, training, complaints, Financial Promotions, sales and mortgage payment protection insurance. It’s a site that has been developed by industry experts for brokers and it is written in refreshingly easy to understand terms.
If, having studied the site, you’re still struggling to know where to start, you need to buy in professional support as a matter of urgency. This is not something you can afford to put on the back burner to be picked up again in a ‘quiet moment’. There is a real risk that if your business is showing systematic disregard for TCF, the FSA may stop you trading.
If you have got to grips with TCF, you will have already realised that it is not as daunting as many people have made it out to be. Working to a set of principles is not always straightforward, but neither is it that difficult if you have embedded the correct ethos in your business.
TCF is a regime that needs to come from the top; it cannot be delegated to junior or even middle managers. That also means that if your firm is found to be at fault, there is only one place to look for the culprits: the directors.
We’re now all operating in a new financial environment in which treating customers fairly is the new mantra.
