Sunday, February 25, 2024
Finance

Watchdog highlights home loans used to consolidate debt

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The City watchdog’s guidelines came into effect three months ago, on 31 July, covering the UK’s 60,000 regulated financial firms, including the mortgage industry’s around 100 lenders and 18,000 brokers and broker firms

Mortgage firm’s treatment of borrowers who use home loans to consolidate debt has improved under the Consumer Duty, but more work needs to be done, says the FCA.

The City watchdog’s wide-ranging consumer-centred guidelines came into effect three months ago, on 31 July, covering the UK’s 60,000 regulated financial companies, including the mortgage industry’s around 100 lenders and 18,000 brokers and broker firms.

The FCA looked at how the new regulations are working in its ‘Retail banking Consumer Duty multi-firm work’ report, which considered 70 products from 47 companies.

The regulator saw examples of improved processes for monitoring changes to customer situations across the product’s lifetime when it looked at customers who used home loans to combine debts.

It points out: Around firms had considered applying ongoing feedback loops with key distribution partners and started work to address common challenges in the chain which could cause delays in the customer journey.

A limited number of companies had clear communication plans to support customers during the product lifecycle beyond that offered to customers who were not using mortgage products to consolidate debt, it said.

But it says: It was disappointing that a number of firms did not consider that consumers were using mortgages for debt consolidation purposes.

We remind firms they need to make sure they have meaningfully considered the debt consolidation customer journey where a product allows for debt consolidation, the regulator says.

This is the case even where firms may not have specifically designated these products as debt consolidation products, it adds.

The regulator reminds firms that the Consumer Duty is the “cornerstone of our three-year strategy and a key part of our work to set and test higher standards”.

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