Consultant Zone

Vulnerable customers and collections processes

Payment performance, particularly over the last couple of years, is a critical issue for acquirers of mortgage assets.  In a continuing low interest rate environment it is essential that existing customers are handled in a compliant manner.

There has been recent commentary about the effect an interest rate rise could have on the performance of mortgage portfolios, so getting integrated policies in place now will help when that eventually happens.

It is also important to consider how the lender has handled individual customers’ situations and that appropriate policies are in place to identify consumers in vulnerable circumstances.  The Financial Conduct Authority (FCA) maintains that consumers in arrears “must be treated fairly and proportionately, and the vulnerable protected”, so it is more important than ever to ensure that collections activity is sympathetic and takes into consideration customers individual circumstances.

In essence the vulnerability agenda is a natural evolution following on from Treating Customers Fairly (TCF) being embedded into lenders systems and processes, ensuring individual customers are treated impartially and delivered an outcome in the context of their situation.

This is a challenge for lenders, but adopting a one-size-fits-all approach to collections brings about its own issues.  When problems occur for existing customers there is a need to understand the extent of the indebtedness and to obtain updated income and expenditure details and review them.  This in turn should enable bespoke solutions for the customer and keep the lender informed and compliant.

For purchasers of mortgage portfolios, it is even more important to spot trends of poor customer practise when a book is being reviewed.  Are there procedures in place to allow front line staff time to spot vulnerable customers and be able to pass them on to specialist departments?  Is the balance correct between policies which are in place to support the collections procedure but allow staff the discretion to identify and help vulnerable customers?

As well as preparing for inevitable interest rate rises, part two of the Mortgage Market Review is also due in Q2 of 2016, so ensuring this key aspect of consumer protection is embedded correctly into companies’ culture is essential.