Mortgages  

FCA monitors Co-op name under new guard

In the latest published minutes of the FCA board meeting, held in December, the board announced it was “monitoring the use of the Co-op name in the new banking entity”.

In November, the Co-operative’s mutual parent ceded a majority 70 per cent holding to a range of investors, including unnamed US hedge fund companies.

Co-operative Group’s total contribution to the deal, which plugged a capital shortfall of £1.5bn, was £462m, including the £129m retail investor “solution”.

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Also in the minutes, the FCA mentioned that the financial policy committee (FPC) had recommended that the FCA “require mortgage lenders to have regard to any future FPC recommendation on appropriate interest rate stress tests, in addition to the five-year test envisaged in the upcoming mortgage market review.

This came as the regulator’s 17-page thematic review, Mortgage Lenders’ Arrears Management and Forbearance, found that a one-size-fits-all approach across the industry may entail that many firms fail to help borrowers in financial difficulty ahead of time.

It has ordered lenders to identify borrowers who could be harmed by rate rises and put strategies in place to deal with them “fairly”.

The review found that frontline staff often lack “skills, knowledge and experience” to make appropriate decisions when customers enter arrears.

It offered an example of a restrictive system used by one unnamed lender which set low payments for customers in early arrears before hitting them with “sudden payment shocks”. The system prevented staff from assessing a customer’s ability to pay and delivering a more “tailored” alternative.

Paul Broadhead, head of mortgage policy at the Building Societies Association, said “Arrears at building societies are well under two-thirds of the level in the market as a whole, reflecting their more personalised approach.”

Jackie Bennett, head of policy at the Council of Mortgage Lenders, said: “We will continue to work with our members to ensure good practice is developed and embedded within firms.”

Key points

* firms do not do enough to help borrowers in financial difficulty ahead of time

* firms must improve the skills, knowledge and experience of front-line staff to help them make more “appropriate” decisions based on the clients circumstances

* a one size fits all approach at some firms meant front line staff could not personally engage with clients on more complex cases and find the right solutions

* must identify borrowers who are vulnerable to rate rises and must put strategies in place to deal with them “fairly”.

IFA view

Donna Hopton, founder of the IFA forum Cherry, said: “My initial reaction is to say that I am keen to further explore exactly what they are doing in terms of working with training firms. They talk about embedding the right cultures but how is accountability embedded. It is unclear to me, as yet, just how much resource really is being ploughed in to this and what form this is taking.”