The Lending Standards Board (LSB) has published the results of its review of third party outsourcing. The review, published on 17 August 2016, examined the adequacy of the Lending Code (the Code) subscribers’ systems and controls to ensure that the Code is complied with where any processes are outsourced.
The review found that all seven participating firms had well-structured and robust management frameworks in place for third party suppliers. The review focussed on arrangements in the UK, although many of the reviewed firms have offshore arrangements. The offshore arrangements were deemed to be higher risk than domestic outsourcing and so the use of third party suppliers will continue to be an area of interest for the LSB.
Since completion of this exercise the LSB has concluded its review into the Code, which has now been superseded by the Standards of Lending Practice (SLP).
The LSB confirmed that whilst third party oversight and due diligence were specifically covered by the Code in section 9 on financial difficulty, the requirements in other sections of the Code were clear in that the subscriber was responsible for Code compliance where it outsourced any processes where there was a Code impact.
The findings of the review will remain relevant under the new SLP and any recommendations will be actioned following its implementation. The SLP is explicit in the requirement for registered firms to ensure that where any part of the credit process/lifecycle is outsourced they should undertake effective and robust due diligence and exercise effective ongoing oversight.