The number of borrowers struggling to keep up with bill and credit payments has risen by 3.1 million in May 2023 when compared to the same time last year, the FCA has reported.

These figures were released as the regulator doubled-down its commitment in supporting those consumers in financial need. Sheldon Mills Executive Director of Consumers and Competition said:

“Our research highlights the real impact the rising cost of living is having on people’s ability to keep up with their bills… We will continue to act quickly to make sure financial firms help their customers who are facing financial difficulty or are worried they might be soon.”

Spotlighted back in January 2023 through the FCA’s Financial Lives survey, around half of UK adults said they felt more anxious or stressed about escalating bills and repayments compared to six months prior – demonstrating the breadth of financial difficulty facing many UK households.

As many two-year fixed rate mortgages come to an end in 2023 and 2024, the mortgage sector could see a significant rise in the number of borrowers struggling to meet their mortgage repayments. The FCA anticipates by June 2024 there could be some 356,000 borrowers in this position. This rise in interest rates means mortgage lenders are facing an increased demand for repayment flexibility from customers, resulting in the need to scale up debt management and customer service functions.

Add to this the impending Consumer Duty deadline – along with claim management companies (CMC) viewing mortgage providers and brokers as prime candidates for their attention – then this is clearly a precarious and demanding time in the sector.

A tumultuous decade so far

Rewind to the start of the decade and the pandemic was having a significant impact on the mortgage sector, with both a dip and boom experienced in 2020. In October 2020, Experian data predicted 1.2 million mortgages would have been approved valued at some £216 billion – this was at a time when a two-year fixed average rate ranged from 1.41% to 1.86%

Fast forward to 2023 and the same terms average approximately 4.63%, that’s an increase of over 200% from the 2020 figure of 1.41%. This means affected homeowners face a huge increase in payments when looking for a new mortgage deal. As a result, the number of customers in financial difficulty will continue to rise – demonstrating just why mortgage providers need to take greater care than ever to support those in need.

Emerging into a new era

In July 2022, two years on from the original Covid lockdown, the FCA made it clear that they’ll be entering into an era of assertive led supervision through the new Consumer Duty. For many months firms have been preparing to both implement and evidence how they’ll meet the four core outcomes which aim to put customer needs at the heart of every financial service decision, and which go beyond the original TCF outcomes

Now, in 2023, we’ve seen many Dear CEO letters, podcasts and communication briefings continue to be released by the regulator – all emphasising how specific sectors will be expected to embed the interests of their customers into their business culture and purpose.

And they’ve been clear to explain that the new rules apply across the whole distribution chain for mortgage lenders and administrators drawing out two particular headlines that apply to this sector amidst the cost-of-living crisis:

• The need for firms to deliver good outcomes for customers in financial difficulty
• The need for firms to provide fair value to retail customers

Consumer Duty’s focus on good customer outcomes and fair treatment

Coming into effect from 31st July, the transformative Consumer Duty regulations are – unsurprisingly – set to form a central pillar of the FCA’s supervision framework.

The regulator set its expectation that the Consumer Duty is to be a top priority for mortgage intermediaries – through the delivery and evidencing of good outcomes and fair value for consumers. Mortgage providers who instil this within their firm now will go some way to avoid customer complaints or the regulator’s request for review and remediation in the future.

“A key part of the Duty is that firms are able to define, monitor, evidence and stand behind the outcomes their customers are experiencing. This monitoring must enable firms to identify where customers, or groups of customers, are experiencing poor outcomes, and where this is the case firms must take appropriate action to rectify the situation.” FCA

Within the Dear CEO letters, mortgage providers and lenders have been urged to implement important baseline activities to monitor (‘show me, don’t tell me’) how effectively their processes meet the new expectations – with gap analyses, baselining and correction plans all encouraged. Adequate resourcing and identifying in good time where any resource shortfalls may lie are also highlighted as diligent steps to take before the new rules come into force.

It is important to remember COCON 2.2.2R which requires senior managers to demonstrate that they are taking reasonable steps to comply with the requirements of the regulatory system. Also, under the soon to be added Principle 12 “a firm must act to deliver good outcomes for retail customers” through sufficiently challenging a firm’s product or service.

In April 2023, the FCA released its Business Plan for 2023/24. Among its most noteworthy details is the regulator’s pledge to spend an additional £5.3m to ensure it has the means to enforce the Consumer Duty rules. The funding will be used to set up specific intervention teams within Enforcement to enable swift investigations into potential misconduct, as well as facilitate sector-specific supervisory work. A clear show of intent from the regulator as to how they intend to implement and enforce these new rules.

The important role of data

Amongst all its Consumer Duty communications, the FCA continue to tip its hat to the power of data – and highlight how now is the optimum time for firms to harness its potential to aid good consumer outcomes.

In its March 2023 Mortgage Lenders and Administrators letter the regulator notes: “Whilst many firms will likely be able to build on their existing data and refocus it through the Duty lens, all firms should think deeply and afresh about the types and granularity of data they need to monitor and evidence outcomes under the Duty and drive further improvements in customers’ experience.”

With so many regulatory changes on the horizon for mortgage providers, staying on top of compliance manually can quickly become unmanageable for even the most experienced teams. That’s why more and more businesses are turning to intelligent solutions and advanced technologies to help staff handle the day-to-day realities of maintaining standards.

Act now to prevent future problems

Be ready for the Consumer Duty starting line

It’s clear that ensuring a smooth transition will require considerable time, attention and resource from even the most well-prepared of teams. And that’s where our in-house compliance experts can help. Consisting of former regulators and senior consultants experienced in delivering valuable insights to help achieve your critical deliveries, TCC provides impartial, detailed review and advice to root out inefficiencies whilst ensuring your processes are flexible and robust.

What’s more, we are well versed in implementation planning and overseeing delivery and can provide you with a springboard for a successful integration of the Consumer Duty into the culture of your business.

Take advantage of Intelligent Compliance

The latest technological advances have been moving the needle when it comes to achieving compliance and conduct in a smarter and more effective way. This ultimately brings new efficiencies and savings when solving regulatory challenges while future-proofing your operations.

At TCC, we bring together our compliance expertise and innovative tech. We’ve been leading the way in smart compliance and deploy state-of-art solutions to improve results for our clients – working hand in hand with our trusted technology partner, Recordsure.

By leveraging our consultancy know-how alongside Recordsure’s pioneering AI, our complementary services deliver the best possible compliance outcomes, whilst driving meaningful regulatory change and streamlining operations.

This dynamic, forward-thinking approach helps bring regulatory success to our clients and partners – in a smarter, faster and more cost-effective manner.

Delivering compliance projects, better with the experts

As Consumer Duty D-Day approaches, now is the time for mortgage lenders and administrators to conduct a review and assess the:

• Clarity of consumer facing documentation to ensure it meets the consumer understanding outcome
• Procedures surrounding consumers in financial difficulty and complaints – do they meet the consumer support outcome?
• Whether your products and services meet the fair value outcome
• Evidence to show the internal and substantive challenge to your firm’s products and services to demonstrate they are right for the target market

TCC’s experts have the experience and regulatory know-how to help firms achieve independent assurance – by identifying and remedying any compliance issues that may come to light. With over two decades of expertise and tried-and-tested experience in compliance delivery, you know you’re in good hands.

With us, you have access to our smart technologies too that offer unique tools to maximise the efficiency of your teams and help deliver your compliance projects to the highest possible quality – saving critical time, and resources.

We use a scalable, tailored strategy so you get exactly the level of support you need. And because we provide truly responsive value-driven service, our clients choose us again and again.

Achieve unrivalled regulatory outcomes

And as mortgage providers focus on good outcomes, fair customer treatment and long-term compliance – the need for monitoring, reviewing and evidencing for compliance has never been greater. That’s why we offer a unique combination of smart people and smart tech to help our clients deliver unrivalled regulatory outcomes.

At TCC, we put our clients first and always look for solutions to provide even better value. We use Recordsure’s ReviewAI product suite – based on proprietary, market-first, AI-driven conversation and document analytics, to deliver business assurance and file review projects. Utilising ReviewAI, we provide a business assurance service which is robust, consistent and able to evidence good customer outcomes.

Together, TCC and Recordsure offer a solid foundation on which to build a strong and effective compliance strategy. We have a proven track record in helping our clients overcome their compliance hurdles and deliver regulatory conduct in a more effective and cost-efficient way.

Demonstrate to your customers and the regulator your firm’s commitment to helping those who are facing financial difficulty by enlisting our expert support – get in touch today.