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

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

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a letter outlining the persistent and emerging risks posed by Mortgage Third Party Administrators to customers amid ongoing financial uncertainties exacerbated by the COVID-19 pandemic. The letter details three main areas of concern: customer treatment, operational resilience, and firms’ prudential resources.

Customer Treatment: The FCA stresses the importance of recognising and addressing the needs of vulnerable consumers, ensuring they receive fair outcomes comparable to other customers. This includes providing appropriate forbearance and clear information to consumers facing financial difficulties and ensuring that complaints and disputes are resolved adequately.

Operational Resilience: Mortgage Third Party Administrators are expected to maintain robust systems and controls to prevent operational disruptions that could lead to customer distress or financial loss. This includes ensuring correct notifications and demands for payments to customers, which are critical during times of operational stress.

Firms’ Prudential Resources: The FCA emphasises the importance of maintaining adequate liquid resources to meet obligations and survive financial strains. Firms are expected to monitor their financial health regularly and manage their resources to prevent disorderly market exits that could leave consumers without clear mortgage-related information.

FCA’s Expectations and Supervisory Focus: The FCA expects firms to prioritise the fair treatment of consumers, especially the vulnerable, and to maintain strong governance over their operational and financial practices. The guidance includes managing consumer complaints effectively, providing extended forbearance where necessary, and ensuring all staff are trained on the relevant conduct rules.

Key Takeaways:

Firms must enhance their focus on treating customers fairly, particularly the vulnerable, and ensure they have strong operational controls and adequate financial resources. The FCA will monitor compliance and act where firms fall short of expectations. Firms should also familiarise themselves with the FCA’s finalised guidance on the treatment of vulnerable customers and ensure compliance to mitigate risks effectively.

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