What can mortgage brokers and intermediaries do to meet the Financial Conduct Authority’s (FCA’s) expectations for supporting borrowers in financial difficulty?
The FCA’s recent action and announcements regarding borrowers in financial difficulty is a clear demonstration that it intends to use its powers to support consumers in the face of the cost-of-living crisis.
With the threat of penalties looming, firms will want to protect themselves from action, but to do this, tick-box training sessions are not enough.
Rising consumer financial distress is clear to see in the most recent data from the Bank of England and Ministry of Justice. In Q1 2024, the value of outstanding mortgage balances with arrears increased by 4.2% from the previous quarter, and compared to the same quarter in 2023, mortgage possession claims increased from 4,035 to 5,182 (28%).
Looking at these figures, it is perhaps unsurprising that the FCA is keen to support consumers. But how can brokers and intermediaries train to not only satisfy the FCA but, more importantly, support their customers?
- Begin training with the end in mind – Consider what each role needs to know, understand and be able to do to effectively support borrowers in financial difficulty. Training must be tailored to each relevant role to specifically achieve the outcomes required.
- Embed curiosity – Lenders and advisers need to be able to identify vulnerable customers through effective questioning to truly understand individual circumstances, vulnerability or financial difficulty now and the future, e.g., is the forbearance option affordable? Are there any issues that mean they need someone else involved to help make decisions?
- Teach the difference between empathy and sympathy – This is vital when in a difficult or emotionally charged conversation with a customer. Advisers need to focus on finding out how they can get the customer the help needed.
- Training is not just the what and the how, it is why – Advisers should understand the consequences of not supporting customers appropriately. Every module should consider the perspective of the customer.
- Don’t rely on e-learning solutions – To change behaviour, skills and mindset, face-to-face training is a necessity (whether in person or facilitated remotely). Experienced facilitators and practical activities to put techniques into action will provide the necessary education and support during practice sessions.
- Explore the ‘what if’ scenarios – Consider and discuss the common as well as the complex and unusual customer scenarios. Encourage advisers to realise that the principles of the customer conversation, such as empathy, understanding and support, apply no matter what the situation, and developing the right skills will allow them to adapt the conversation to suit the customer’s circumstances.
- Validate and benchmark learning – Competence-based assessments, focused on the practical application of learning to each role (for example, by using role plays) provide assurance that advisers are able to meet the required standards. Such benchmarking also identifies areas for development, so is essential to continued improvement.
As the FCA drives for better support of borrowers in financial difficulty, it will want to see that all those in the financial services sector are investing in, carrying out and completing training of their teams.
However, a significant task is ahead, because the FCA expects firms to understand that implementation of skills is not a one-off.
Meeting the regulator’s expectations is an ongoing compliance and evolution exercise. This is why benchmarking, policies, processes, procedures and leading by example from the very top of an organisation are all important parts of the puzzle. The market and the circumstances of consumers are constantly changing, so when it comes to borrowers in financial distress, ongoing evolution is just as important as instant action.
