Independent review and analysis

Lifetime mortgage providers under the regulatory spotlight

Regulatory guidance lands on lenders’ desks in a variety of formats; guidance notes, consultation documents, policy updates, notifications of regulatory fines, Dear CEO letters and, on occasions (in respect of key concerns) letters addressed to the whole Board of Directors.  The latter should currently be a focus of Lifetime Mortgage Providers’ Boards as they received such a ‘warning shot’ at the end of last month.

As warning letters go, this was a ‘biggie’; it was based on an analysis of providers’ strategies and business models and took into account a range of information and data, including firms’ regulatory histories and the number and nature of complaints. When the FCA states “We have several areas of concern which may lead to consumers and markets being harmed that you should consider and address” you just know it is time for change. The final FCA warning shot is that they announced they will be carrying out more work in this area in 2021.

The areas under review are wide ranging and include product design, governance, post-sales systems and controls, introducer oversight and inappropriate sales. They have also announced that they will be looking into the lifetime mortgage ‘customer journey’ from concept to redemption.

To pass the FCA test, firms will need to focus on 3 key areas where they should:

1. Be able to identify and respond to customers’ changing needs
2. Adopt robust governance and frameworks that include effective
challenge to any risk assessments, and
3. Monitor products via MI and customer feedback on an ongoing basis to
identify potential customer harm

All types of lending, including lifetime lending, is our business ‘bread and butter’, including the oversight challenges by the FCA. We have carried out numerous projects and reviews in the Lifetime Mortgage sector. If you would like to find out more about the FCA ‘Dear Board of Directors’ letter, how we can help with your business reviews, or if you would like to hear more about how we can help you gain better insights and manage and mitigate risk, give us a call.

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