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MCOB 13.3 Dealing fairly with customers with a payment shortfall: policy and procedures4

MCOB 13.3.1R
  1. (1)

    A firm must deal fairly with any customer who:

    1. (a)

      has a payment shortfall4 on a regulated mortgage contract or home purchase plan;1

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    2. (b)

      has a sale shortfall; or1

      1
    3. (c)

      is otherwise in breach of a home purchase plan.

  2. (2)

    A firm must put in place, and operate in accordance with, a written policy (agreed by its respective governing body) and procedures for complying with (1). Such policy and procedures must reflect the requirements of MCOB 13.3.2A R and MCOB 13.3.4A R.3

MCOB 13.3.1AR
  1. (1)

    4Where a customer has a payment shortfall in relation to a regulated mortgage contract or home purchase plan, a firm must not attempt to process more than two direct debit requests in any one calendar month.

  2. (2)

    Where a firm’s direct debit request, in respect of a customer who has a payment shortfall on a regulated mortgage contract or home purchase plan, has been refused, on at least one occasion in each of two consecutive months, due to insufficient funds, the firm must:

    1. (a)

      consider whether the method of payment remains suitable for the customer;

    2. (b)

      make reasonable efforts to contact the customer to discuss whether the method of payment remains suitable for the customer; and

    3. (c)

      not pass on any costs to the customer which were incurred as a consequence of presenting direct debit requests during this period of consideration.

MCOB 13.3.1BG

4MCOB 13.3.1AR (2)(c) does not prevent a firm from attempting to process up to two direct debit requests in any one calendar month provided the firm has made reasonable efforts to contact the customer and the customer has failed to respond.

Vulnerable customers

MCOB 13.3.1CR

5A firm must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers whom the firm understands, or reasonably suspects, to be particularly vulnerable.

MCOB 13.3.1DG
  1. (1)

    5Customers who have mental health difficulties or mental capacity limitations may fall into the category of particularly vulnerable customers.

  2. (2)

    In developing procedures and policies for dealing with customers who may not have the mental capacity to make financial decisions, a firm may wish to have regard to the principles outlined in the Money Advice Liaison Group (MALG) Guidelines "Good Practice Awareness Guidelines for Consumers with Mental Health Problems and Debt".

3

Customers in payment difficulties: procedures5

MCOB 13.3.2E
  1. (1)

    3[deleted]3

  2. (2)

    3[deleted]3

MCOB 13.3.2AR

3A firm must, when dealing with any customer in payment difficulties:

  1. (1)

    make reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall4 or sale shortfall, in the case of the former having regard to the desirability of agreeing with the customer an alternative to taking possession of the property;

    4
  2. (2)

    liaise, if the customer makes arrangements for this, with a third party source of advice regarding the payment shortfall4 or sale shortfall;

    4
  3. (3)

    allow a reasonable time over which the payment shortfall4 or sale shortfall should be repaid, having particular regard to the need to establish, where feasible, a payment plan which is practical in terms of the circumstances of the customer;

    4
  4. (4)

    grant, unless it has good reason not to do so, a customer's request for a change to:

    1. (a)

      the date on which the payment is due (providing it is within the same payment period); or

    2. (b)

      the method by which payment is made;

      and give the customer a written explanation of its reasons if it refuses the request;

  5. (5)

    where no reasonable payment arrangement can be made, allow the customer to remain in possession for a reasonable period to effect a sale; and

  6. (6)

    not repossess the property unless all other reasonable attempts to resolve the position have failed.

MCOB 13.3.3G

The requirement in MCOB 13.3.1 R(2) for a written policy and procedures is intended to ensure that a firm has addressed the need for internal systems to deal fairly with any customer in financial difficulties. MCOB 13.3.1 R(2) does not oblige a firm to provide customers with a copy of the written policy and procedures. Nor, however, does it prevent a firm from providing customers with either these documents or a more customer-orientated version.

MCOB 13.3.3AR

3In complying with MCOB 13.3.2A R, a firm must give a customer a reasonable period of time to consider any proposals for dealing with the payment difficulties.

MCOB 13.3.4G
3
  1. (1)

    3[deleted]3

  2. (2)

    3[deleted]3

MCOB 13.3.4AR

3In complying with MCOB 13.3.2AR(6):

  1. (1)

    a firm must consider whether, given the individual circumstances of the customer, it is appropriate to do one or more of the following in relation to the regulated mortgage contract or home purchase plan with the agreement of the customer:

    1. (a)

      extend its term; or

    2. (b)

      change its type; or

    3. (c)

      defer payment of interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall); or

    4. (d)

      treat the payment shortfall4 as if it was part of the original amount provided (but a firm must not automatically capitalise a payment shortfall where the impact would be material4); or

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    5. (e)

      make use of any Government forbearance initiatives in which the firm chooses to participate;

  2. (2)

    a firm must give customers adequate information to understand the implications of any proposed arrangement; one approach may be to provide information on the new terms in line with the annual statement provisions.

MCOB 13.3.4AAR

4In MCOB 13.3.4A R, the impact of a capitalisation would be material if, either on its own or taken together with previous automatic capitalisations, it increased:

  1. (1)

    the interest payable over the term of the regulated mortgage contract by £50 or more; or

  2. (2)

    the contractual monthly repayment amount under the regulated mortgage contract by £1 or more.

MCOB 13.3.4BR

3A firm must make customers aware of the existence of any applicable Government schemes to assist borrowers in payment difficulties in relation to regulated mortgage contracts.

MCOB 13.3.4CG

3Firms should note that the list of options to consider set out at MCOB 13.3.4AR(1) is not exhaustive. The FCA would expect firms to be able to justify a decision to offer a particular option.

MCOB 13.3.4DG

3In the FCA's view, in order to comply with Principle 6, firms should not agree to capitalise a payment shortfall4 save where no other option is realistically available to assist the customer.

4
MCOB 13.3.5G

3[deleted]

3
MCOB 13.3.6G

In relation to adopting a reasonable approach to the time over which the payment shortfall4 or sale shortfall should be repaid,1the FCA takes the view that the determination of a reasonable repayment period will depend upon the individual circumstances. In appropriate cases this will mean that repayments are arranged over the remaining term.

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MCOB 13.3.7G

In relation to granting a customer's request for a change to the payment date, a term that purported to allow a firm to change the payment date unilaterally might in any event contravene the Unfair Terms Regulations (for contracts entered into before 1 October 2015) or the CRA.6

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MCOB 13.3.8G

Firms that propose to outsource aspects of customer relationships (including collection of debts or any other sums due1) should note that and SYSC 8,2 a firm cannot contract out its regulatory obligations and1 the FCA will continue to hold them responsible for the way in which this work is carried on.

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Record keeping: payment shortfalls and repossessions4

MCOB 13.3.9R
  1. (1)

    A mortgage lender or administrator 1must make and retain an adequate record of its dealings with a customer whose account has a payment shortfall or 4 a sale shortfall1, which will enable the firm to show its compliance with this chapter1. That record must include a recording of all telephone conversations between the firm and the customer which discuss any amount in arrears or any amount subject to payment shortfall charges4.3

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  2. (2)

    A mortgage lender or administrator 1must retain the record required by (1) for three years 3from the date of the dealing.31

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MCOB 13.3.10G

The record referred to in MCOB 13.3.9 R should contain, or provide reference to, matters such as:

  1. (1)

    the date of first communication with the customer after the account was identified as having a payment shortfall;4

    4
  2. (2)

    in relation to correspondence issued to a customer with a payment shortfall4, the name and contact number of the employee dealing with that correspondence, where known;

    4
  3. (3)

    the basis for issuing tailored information in accordance with MCOB 13.7.1 R in relation to a loan solely for a business purpose4;

  4. (4)

    information relating to any new payment arrangements proposed;

  5. (5)

    the date of issue of any legal documents;

  6. (6)

    the arrangements made for sale after the repossession (whether legal or voluntary);

    4
  7. (7)

    the date of any communication summarising the customer's outstanding debt after sale of the repossessed property;3 and4

  8. (8)

    the date and time of each call for the purposes of MCOB 13.3.9R(1).3

MCOB 13.3.11G

For details of the standard expected of firms in relation to maintaining records, see MCOB 2.8 (Record keeping)