Lenders have been slammed by the FCA for “inconsistency” in the way they consider the effect of their actions on borrowers.
The FCA’s latest thematic review paper, published on 19 March, stated that lenders needed to up their game and consider whether the lending strategy they opted for was in their customers’ best interests.
This assessment of their lending strategy should include ensuring they understand the impact on the actual customer experience and how the decision will affect the customer.
Lenders were told they should challenge themselves in terms of the possible impact on customer outcomes throughout the duration of those strategies. This meant keeping lending strategies under review from a customer outcome perspective, as well as from a commercial one.
In the paper, the FCA said that following a review of 10 banks, building societies and niche lenders, it concluded that all lenders should also ask themselves if they had the right individuals or committees in place for the approval of a lending strategy and to assess the conduct risk of that strategy.
They were also told it was not good enough just to make assessments at the start of a lending strategy, and they should be looking at it throughout the implementation, operation and conclusion.
While the thematic review fell short of coming up with new rules dictating how lenders should consider borrowers when making decisions about the way they do business, the FCA did state it was unhappy about “some firms” being “overly reliant on a small number of key individuals.”
The FCA warned that this “poses a risk to customer outcomes because, unless these conduct champions are involved in every step of the strategy formulation, there will be times when the firm will fail to challenge effectively on behalf of the customer”.
The regulator stated: “We believe more needs to be done by firms to ensure that conduct champions’ focus on good customer outcomes is not diluted or lost as strategies are implemented.
“Firms need to ensure that conduct and focus on customer outcomes are understood by all business levels and operational business areas, and they are owned by everyone in the business.”
Adviser view
Anna Sofat, managing director of IFA firm Addidi Wealth, said lenders need to be pushed away from offering short-term fixes for borrowers rather than long-term loans.
She said: “I do think lenders and borrowers need to think more about the end game. This is a long-term debt.”
