One might
say that this is stating the obvious and that it is understood that implementation
also matters. A recent FCA
enforcement case against Moneybarn would suggest that it is not so
obvious after all.
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 forbearance and resolution), 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.
2. Implementation
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 initial
engagement starts with a seemingly low-profile review of a “limited number” of
files and call records leading to a visit in July 2016 to assess forbearance
and termination practices. There were then several interactions with
the FCA in September 2016 and January 2017, leading to a formal request for
imposition of a requirement in June 2017 and eventually enforcement action. One
must wonder if a more proactive engagement with the FCA would have prevented
the escalation to enforcement.
It is
usually noted that proactive engagement with the FCA and the issues raised
would have been expensive. Hindsight may be a powerful tool but it
is not clear that the cost of the proactive engagement would have been unlikely
to exceed the enforcement costs, which ended up being very substantial – 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.
[1]
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.
