Following the most recent FCA lender fine, conversations with our business partners have been ‘off the scale.’ Everyone is shocked that collection teams are still getting it so wrong. FCA fines for the poor treatment of arrears and vulnerable customers is nothing new, and although they appear to relate to historic cases, be in no doubt, everyone is starting to question their own policies and procedures – again.
We are not surprised; the cost of non-compliance is now so significant that no rational thinker can just write these amounts off as simply a cost of doing business.
So, what is the cost of non-compliance?
• Lloyds Bank, Bank of Scotland and The Mortgage Business fined £64 million for failures in mortgage arrears handling between April 2011 and December 2015, and then they paid out another £300 million in customer redress to around half a million customers.
• Barclays Bank and Clydesdale Financial Services Limited fined £26 million for poor treatment of consumer credit customers in arrears between April 2014 and December 2018, and paid close to another £273 million in redress to around 1.5 million customers.
• HSBC and Marks and Spencer Financial Services fined £6 million for failures in treating customers in arrears or financial difficulty fairly, between June 2017 and October 2018, and paid another £185 million in redress to over 1.5 million customers.
And now, the most recent FCA action……
• TSB Bank fined nearly £11 million for failing to ensure customers who were in arrears were treated fairly between 2014 and 2020, close to £100 million in redress paid to nearly quarter of a million mortgage, overdraft, credit card and loan customers. Compounding matters, TSB became “aware of potential problems with its collections and recoveries in December 2016. However, it was not until the review in 2020 that TSB took effective action to fully address them.”
In just four FCA interventions, the resultant cost of non-compliance is close to £1bn, without factoring in the cost of management time sorting out the mess, and doesn’t include the cost of misery and added stress for 4.5 million customers. Of course, this damages the firms’ reputation too, something that will be more significant in the ongoing ‘Consumer Duty’ world.
Rockstead has experience in digging into these issues and our work in this area has evolved over the last 16 years. The foundations of what we do and how we can help firms are as strong today as they were back in the noughties, when we helped fix several banks’ relationships with their customers.
Our people are all experienced subject matter experts, and we continue to provide independent support and oversight on these and other risk matters. Get in touch to discuss how we can support lenders, holders of loan assets, servicers and asset managers in their collections and arrears activities.