FCA demands mortgage lenders be fairer

The Financial Conduct Authority (FCA) has called on mortgage lenders to be fairer on customers that are in arrears.

It demanded front-line staff should be better trained and have more empowerment to make informed decisions on loan forbearance. Additionally, firms were told to become more flexible and understanding of their customers' needs and personal circumstances.

Research carried out by the industry regulator found that currently, lenders on the whole do not implement forward-thinking and proactive strategies to effectively engage with borrowers in arrears. Additionally, collections agents usually adopted a 'one size fits all' approach when it comes to dealing with clients that owe money. They are accused of not paying attention to the individual vulnerabilities of people and not implementing judgement-led solutions.

To combat this, the FCA called on financial organisations to promote a different, customer-orientated culture in their operations which concentrated on delivering outcomes that had the consumer's interest at their heart. Leadership was also necessary when it comes to collections agencies so that they were able to make decision more autonomously.

However, the regulator did praise the companies for offering customers the opportunity to seek free and unbiased money advice. It added that businesses were identifying the fact that indebtedness was a significant cause of customers falling into arrears and consistently offered clients encouragement to claim for benefits and insurance they were entitled to.

It also highlighted cases where mortgage companies which offered their customers advice on managing their money early in the process actually benefitted as a result. One organisation that adopted the policy saw almost a 50 per cent increase in payments received thanks to the initiative.

Clive Adamson, director of supervision at the FCA, commented: "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."

According to the latest statistics, the number of mortgage arrears declined in 2013. Figures released by the Council of Mortgage Lenders showed 1.29 per cent of customers owed money during last year, a drop from 1.4 per cent in 2012.

By Joe White