Dear Board of Directors | Release Date: 10th August 2021

To read a longer summary of this Dear Board of Directors, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a letter addressing the risks and expectations associated with outsourcing to Third Party Mortgage Administrators (TPAs). This communication highlights the ongoing responsibility of financial institutions, despite outsourcing certain functions, especially in the context of the increased financial uncertainties due to the COVID-19 pandemic.

The key risks associated with TPAs remain significant, including the potential exacerbation of consumer harms if the outsourcing relationship is poorly managed or monitored. The FCA underscores that regulatory responsibilities for outsourced activities cannot be transferred to TPAs. Financial institutions must ensure that TPAs adhere to agreed policies and procedures and have robust systems, controls, and governance mechanisms in place to treat consumers fairly.

Senior Managers responsible for overseeing TPAs are required to include this responsibility in their Statements of Responsibility and will be held accountable for any breaches of FCA rules. Institutions must verify that TPAs have sufficient resources to manage outsourced activities effectively.

In terms of consumer treatment, the FCA stresses the importance of providing forbearance and careful consideration to consumers facing default or arrears. Institutions should ensure TPAs are making sustainable repayment arrangements where necessary.

The FCA expects all financial services firms to engage in practices that ensure fair treatment of customers, clear communication, fair resolution of disputes, and compliance with FCA Principles and Handbook rules. The letter serves as a reminder for institutions to critically assess and monitor the operations of their TPAs to minimise consumer harm.

Key Takeaways:

Institutions should rigorously monitor their TPAs to ensure compliance with FCA standards, particularly in handling consumer difficulties during the pandemic. The FCA will take action against TPAs that cause significant consumer harm. Institutions must maintain clear communication lines with the FCA for any related concerns.