One might say that this is stating the obvious, but it is not so in the case of a recent FCA enforcement case against Moneybar, a lender providing motor finance for used vehicles to ‘non-standard’ customers.
This FCA enforcement case relates to the regulatory expectations about treatment of and communication to customers that fall into financial difficulties, i.e. the exercise and communication of appropriate forbearance by the lender. Here we seek to tease out the implications of this case for FCA regulated business more generally.
1. Appropriate policy design
As one would expect, policies need to cover the appropriate ground. This can include articulating the appropriate range of options (in this case, for customers), the considerations that would be taken into account and the governance that would apply to different options.
It is worth noting that in this enforcement case, it appears that the FCA had no obvious concerns about the relevant policies and procedures reviewed.
The challenge is how these policies and procedures are translated in the business, e.g. whether the call scripts are consistent with the policies. In some case, this means that calls would be far from “linear”. Customer service agents will have to consider a range of options and guide the customer. This would have implications for training and tools available for customer service agents.
The FCA notes that “from the review of the sample the use of any other forbearance options”, other than clearing their arrears over a short period of time, “despite the fact that policies and procedures referred to other available options”.
3. Monitoring and assurance
There is usually a combination of first line monitoring and oversight by 2nd and 3rd line functions. To some extent, who provides assurance becomes less important than whether assurance is provided.
It is important to recognise that assurance should be provided about the processes and about the outcomes. Where the nature of the issue involves considering customers’ individual circumstances in response to financial difficulties, then it is important to evidence that the range of options set out in the policy have been delivered. This is more challenging to monitor than following a process.
It is interesting that in this enforcement note there are no references to assurance or to the role of 2nd and 3rd line functions.
4. Regulatory relationship management
The FCA engagement starts in what one might describe as low profile with a review of a “limited number” of files and call recordings. There are then several interactions with the FCA in September 2016, January 2017 leading to a formal request for imposition of requirement in Jun 2017. One must wonder if a proactive engagement would have stopped escalation to enforcement.
It is usually noted that proactive engagement with the FCA and the issues raised would have been expensive. Hindsight is a powerful tool but it is not clear that the cost of the proactive engagement would have exceeded the enforcement cost – the fine of £2.7m, the impact on senior management’s time, and the £30.3m of compensation paid to customers potentially affected by these failings.
 Non-standard customers are those that cannot access finance from mainstream lenders because they have a poor or no credit history or past problems with credit due to unemployment, ill health or other adverse events.