Expect more fines for arrears firms.
Posted on June 13th 2009
The FSA issued a stark warning to Third Party Administrators (TPAs) and specialist lenders that standards were not good enough in relation to arrears management. Treating customers fairly seems to be at the heart of the problem but in my experience there are deep rooted inadequacies in how arrears are handled, not just by TPAs but across the board. Over the last 15 years or so arrears and repossessions have been relatively low. Rampant house price inflation meant that even in the event of a repossession losses were near nonexistent and therefore it didn’t really matter how good or bad the servicer was. But that was when the economy was in much better shape, now arrears and repossessions are a political hotbed and the government is intervening to force lenders to have significantly more forbearance towards borrowers. With the numbers of arrears cases soaring this has also put considerable strain on people resource; some TPAs have more than doubled their numbers of collections staff whilst more than halving the average length of experience of their teams. I can only conclude that in the rush for headcount many TPAs have recruited people with little or no experience and this may have lead to some of the issues referred to in the FSA press release. However, there is also the problem of legacy technology platforms, some of which are as old as the hills. Government intervention and regulatory pressures means that IT platforms will need to be significantly upgraded to cope or in some cases scrapped and started again. This market needs to change significantly and now that the FSA has shined a light on it expect to see significant fines for many companies.
