Stand back because a touch paper has been lit...Things we all need to take away from the latest guidance from the FCA – even if you don’t work in the mortgage industry

Nothing can so quickly reduce a blog’s reading numbers to zero, quite like starting with the catchy line about reading FCA guidance, especially when the perception is that the mortgage industry has nothing to do with you, because you work in car finance, for example. But there are some themes that we all need to sit up and take notice of, because this guidance is likely to cause ripples on all other guidance that will be coming our way in the days and weeks ahead.

Synopsise it for me

Having read all 19 pages of the guidance (find it here), let me make it simple for you in terms of the headlines. These are not exhaustive, but the ones I have picked out, through my complaints handling lens.

  • Tailored support is expected to be back after 31 October (why is it always Hallowe’en for this stuff?)
  • Customer’s individual circumstances need to be considered to provide forbearance, including consideration of their other debts and living costs. But, taking into account the number of people needing help businesses may have to use a broad brush approach for short term help, especially when it comes to those people facing similar issues.
  • Ways of supporting them can include short and long term solutions, including capitalising missed payments on to the mortgage, extending the term, changing its repayment type, deferring payments etc
  • Staff must be trained to an appropriate level to deal with these types of issues and businesses might have to recruit to meet the numbers of people asking for help.
  • Businesses need to have written policies setting out how it will help customers.
  • Spotting vulnerability is a requirement.

There are other bits to consider including reporting to the Credit Reference Agencies after a payment holiday and after any further assistance has been provided, but I’ve focused on this to give a broad perspective on things, because there are a couple of pinch points, which all sections of the industry need to consider.

If you take nothing else away though, the key messaging is, the blanket approach to helping is no longer going to be available, and businesses need to have a concrete plan for helping anyone asking for help. It must also make sure there are sufficient staff to help these people and that it has processes and policies in place to justify why it’s done what it has done.

I still can’t see why I should be fussed.

Putting to one side the fact that we’re already watching the approaching shit-show on the horizon, this guidance doesn’t fill us with confidence when it comes to businesses being able to offer the support some customers might be expecting. What do we mean by this? Customers have had a good few months of being offered help, without needing to do much hoop jumping, but with this move back to a tailored approach, businesses are rightly going to want to do more checks and bum covering, because the regulator will start looking at what they are doing again in the near future.

This means there are going to be pinch points and clashes between what a firm can do and what a customer wants or expects. And that means only one thing…complaints. So, let’s have a look at some of these pinch points and see what we can do to reduce their impact.

  1. Customers need help

The plain and simple fact is people are going to need help now, in the short term and in the long term. There has always been vulnerability when it comes to money and mental health, but this issue is going to see people that have never had to worry before, suddenly being impacted by this, and they won’t have the capacity to do that.

This means increasing consumer contact, increasing emotion and frankly fear. And fear can come out as crying, shouting, anger…you name it. This means more stress on staff, communications channels and worsening customer service. It all makes for the perfect conditions for complaints.

What you can do to counteract this is get ahead of the curve. Ask yourself some pretty searching questions and put your process under the spotlight.

  • What are the likely reasons going to be for contact from a customer? Put simply, I need help and I need it now. That means thinking ahead – have you thought about what your process will be for customers asking for assistance? Have you got enough staff to cover the increased contact? Have you sorted out communication for when people can’t get through? Have you sorted out additional support to help staff cope with all of those emotions – anger, upset, fear?

If you haven’t then now is the time.    

  1. Communications channels must be available

We know some businesses still haven’t got to grips with getting all of their communications channels back up to normal levels. Phones aren’t available, post rooms are running at a reduced capacity and communication is mostly being done over email.

If this is you, then I hate to break this to you, but that isn’t good enough, not for your customers, not for your staff and not for the FCA. We are six months into Covid and if your house is not in order, the regulator will take a dim view, and so will your customers. And that means, yep you’ve guessed it, more complaints and more pressure on stressed staff.

If you get nothing else achieved before the end of October when we’re expecting complaint numbers to start increasing, I would urge you, very strongly, to get your communications channels up and functioning normally.

  1. Some of these issues have long shelf lives

What do I mean by this? That payment deferral that gets capitalised on to the back of a loan, means the customer is paying for that in the long term. Any changes to the basis of the lending, such as changing a mortgage from repayment to interest only, means a customer has the very real chance of not being able to repay the mortgage at the end, because how likely is it that they can afford a repayment vehicle? Yep, slim to none. It’s not their priority right now. 

Be prepared to be able to justify the decisions you make, to the customer x number of years down the line and the regulator (and possibly the ombudsman). It’s tough weighing the short term help that’s being asked of you, with the long term picture for the client, but you absolutely must communicate clearly with them about what the ‘solution’ means. Chances are they may not take it in, but you positively need to be sure you have explained it and they have understood it, otherwise you’ll have another complaint some years down the track and no way to prove that you told them about the risks. You owe it to your customer and your business to cover your backside properly.

So, yeah lots for us all to ponder in a meaningful way because we all have to make sure we’re looking for ways to make this as simple and easy for the customer, while balancing a good level of security and protection for us as businesses.

And let’s face it this is an explosive mix, because we need to delicately balance customers that have up until this point had support without too much effort, to one where we’re now expecting them to do more, despite there being no end to their difficulties.

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