The credit crunch has created an air of regulatory urgency across the whole financial industry that is unprecedented and will have significant impacts on the mortgage market particularly. Just last week the regulator stated its intention to triple fines; a move I thoroughly agree with. Only when it is made punitive to cut corners will businesses prone to such actions sit up and listen.
In fact I would not argue against even steeper fines the size of which have the potential to significantly disrupt a business from continuing to trade. Both lenders and third party servicers are likely to feel significant regulatory pressure over the coming years as the numbers of vulnerable borrowers who have fallen into arrears climbs. Not only is there regulatory pressure to treat customers fairly there is political pressure to ensure that only as a last resort borrowers should be repossessed. This is going to be a significant challenge for many businesses to adapt to, not least from a systems point of view.
The fact that a number of businesses were warned last year about regulatory failings and since have been found to have not rectified these shortcomings shows that there are systemic issues that need to be dealt with. Unfortunately many lenders and third party servicers will need to invest heavily to bring their collections activities up to the required standard just at the time when their profits have been annihilated.
