The FCA has published key findings from its thematic review into vulnerable customers. This review followed the report Mortgage lenders’ arrears management and forbearance (TR14/3, February 2014). The aim of the thematic review was to enable the FCA to understand what strategies mortgage lenders have in place to mitigate the impact of any interest rate rise on financially vulnerable customers. Such customers are taken to include both those who are less able to cope with an increase in their monthly payments, as well as those in arrears already.
In setting out its findings, the FCA focused on the following areas:
- Identifying financially vulnerable customers.
- Mitigation strategies.
- Lenders’ communications with vulnerable customers.
- Monitoring the impact.
The FCA encourages firms to plan for a rate rise and assess the impact on customers now, rather than reacting to a rate change without having proper strategies in place, which could in turn have an adverse effect on customers. Whilst recognising that customers have a role to play by assessing their own financial position and taking steps to address any forthcoming difficulties accordingly, the FCA stated that firms should also plan ahead, for example considering additional resource to deal with customers making contact when interest rate increases do occur.
The review began in early 2016, at a time when an interest rate rise was anticipated. Since then, interest rates have been cut and the FCA recognised that preparing for interest rate rises may not seem like a high priority. Nevertheless, it decided to share the results of its review to assist firms and customers to prepare for when interest rates do rise. In other areas of its work, the FCA noted it is assessing the impact of rates remaining low.