FCA publishes policy statement and finalised guidance on ways consumer credit and mortgage firms should support customers in financial difficulty

Earlier today, on 10 April 2024, the UK Financial Conduct Authority published a press release and Policy Statement, PS24/2, setting out the new rules and guidance which will apply to consumer credit and mortgage firms to support customers in financial difficulity.

The FCA has also published updated finalised guidance, FG24/2, and a press release.

The changes made to both CONC and MCOB by PS24/2, and FG24/2, will come into force on 4 November 2024.

We’ve set out a summary in a one page infographic (if you click the infographic it should be larger):

If you want a PDF copy, please contact your usual contact at Walker Morris LLP.

FCA publishes data on Mortgage Charter uptake

On 22 March 2024, the UK Financial Conduct Authority published data on firms who have signed up to the Government’s Mortgage Charter.

The key points are:

– There are 48 signatories to the mortgage charter (making up around 90% of the mortgage market).

– The data suggests at least 760,000 accounts benefitted from one or more of the options set out in the Charter.

– Around 90,543 mortgage accounts have temporarily reduced their monthly payments under the FCA new rules.

– Between July 2023 and January 2024, the monthly payments on around 123,000 accounts were reduced as people switched to temporarily paying interest-only or extended their mortgage term (making up around 1.4% of the regulated mortgage contracts). Only 103 term extensions were reversed.

– The data says 67 properties were repossessed within 12 months of missing the first payment. Firms say these were for customer-driven reasons.

– It is difficult to estimate the total number of borrowers who have taken up one or more of the options set out in the Charter.

– The FCA reminds firms that the options under the Charter form only part of the support. All borrowers can contact their lender and discussion their options (see, for example, the industry’s ‘Reach Out’ campaign. This support could include contract variations or appropriate forbearance measures.

FCA publishes findings of multi-firm review into insurers’ valuations of vehicles

On 27 March 2024, the UK Financial Conduct Authority published its findings into its review of firms’ claims-handling processes for valuing vehicles which have been stolen or written-off (often called ‘total loss’ claims).

Some of the key points are:

– Firms must deal with total loss claims promptly and fairly and in line with their obligations under ICOBS 8.1 leading to firms “identifying a fair estimate” of a vehicle’s market value.

valuation of vehicles:

* The FCA found some good practice including firms offering settlement values closely aligned to retail prices and the firms used the same guides for valuations as the Financial Ombudsman Service.

* The FCA found some areas for improvement including examples of firms offering values lower than available guide prices, firms making deductions based which could lead to unfair customer outcomes and making ‘initial offers’ which are not the firms’ best offers.

communicating an initial offer:

* The FCA found good practices of initial offer communications clearly explaining the settlement offers and such offers giving customers an opportunity to give additional information relevant to valuation.

* The FCA found some areas for improvement including ensuring communications do not dissuade customers from challenging valuations.

handling disputed valuations:

* The FCA found good practices of firms allowing customer to provide additional information relevant to valuation and, where a customer rejects a revaluation, most firms treated such challenges as a complaint.

* The FCA found some areas for improvement including not discouraging customers from disputing valuations and not having enough MI to show that a revaluation did not result in systematically different outcomes for customers.

outsourcing: the FCA found several areas for improvement including: (a) having better oversight arrangements, (b) better managing conflicts of interest and (c) ensuring that outsourcing did not lead to systematically different customer outcomes.

treatment of policies after a claim settlement:

* The FCA found some good practices including most firms giving customers the opportunity to substitute a vehicle on the policy for the rest of the term.

* The FCA found some areas for improvements including firms requiring customers to pay the remaining premium from the settlement rather than allowing customers to continue making monthly payments of the premium.

management information and data collection: the FCA found areas for improvement including (a) collecting basic data on total loss claims, (b) monitoring the average deviation between vehicle valuations and guide prices and (c) demonstrating that appropriate MI was collected and analysed to ensure different approaches do not lead to systematically different customer outcomes.

Insurance firms, and third parties providing insured valuation services, will need to quickly digest the FCA’s findings and make changes (where relevant) with a clearly documented rationale for any steps taken by them. The FCA is likely to pick up all of these themes in any future engagement with such firms.