Industry guidance on arrears and possessions to help lenders comply with MCOB 13 and TCF principles. October 2008

Transcription

1 COUNCIL of MORTGAGE LENDERS NORTH WEST WING, BUSH HOUSE, ALDWYCH, LONDON WC2B 4PJ tel: fax: website: Industry guidance on arrears and possessions to help lenders comply with MCOB 13 and TCF principles October 2008

2 Industry guidance on arrears and possessions to help lenders comply with MCOB 13 and TCF principles INDEX Introduction 1. Lenders policies 1.1 What your policy must include 1.2 What your policy may include 2. Practices and procedures for ensuring arrears and possession policies are followed 2.1 Record keeping 2.2 Information for customers 2.3 Avoiding undue pressure on customers 3. Possession Action 3.1 Before starting action for possession 3.2 Marketing a property in possession 4. Debt counsellors 5. State support and MPPI 6. Management information (MI) and quality control 7. Other considerations 7.1 Training and competency of staff 7.2 Customer contact 7.3 Courts and court agents 7.4 Outsourcing 7.5 Arrears charges

3 Industry guidance on arrears and possessions to help lenders comply with MCOB 13 and TCF principles Introduction First charge lenders are regulated in the way they conduct their business on mortgages by the Financial Services Authority (FSA) through its Mortgage Conduct of Business Rules (MCOB). MCOB chapter 13 sets out how lenders should treat mortgage customers in the arrears and possessions process. MCOB 13 states that lenders should put in place and operate in accordance with a written policy to ensure that lenders are treating customers in arrears, or who have a sale shortfall or are in breach of a home purchase plan, fairly (13.3.1). That same chapter also requires lenders to put in place procedures to ensure fair dealing with customers. Compliance with the requirements in that chapter is evidence that the lender has treated its customer fairly. Each case should be treated on its merits and a lender should only repossess the property where all other reasonable attempts to resolve the position have failed (13.3.1(f)). It is in the interests of both the lender and the customer that mortgage payments are made promptly and that difficulties are resolved wherever possible without court proceedings. However, in some cases an order for possession may be in the interest of both the lender and the customer. This guidance has been prepared by the CML in consultation with members to help lenders in their interpretation of MCOB 13 and in meeting their obligations under treating customers fairly (TCF) principles. It takes into account the findings from the FSA s thematic review and in particular its good and bad practice guidance and also takes into account issues raised by the Financial Ombudsman, advice agencies and the court service. The guidance applies to first charge mortgages regulated by the FSA. It does not apply to unregulated buy-to-let loans. The FSA has been consulted on this guidance and is aware of its contents. It has not at this stage been asked to confirm this as industry guidance. The guidance has no regulatory status and some of the examples of good practice given may not be appropriate for all lenders. 1. Lenders policies MCOB requirement Policy good practice examples. Your policy states - Procedure good practice examples Lenders must deal fairly with That you will treat customers in arrears fairly. Your policy is signed off by the Board, which receives customers in arrears How treating customers fairly (TCF) will apply to regular reports on arrears and possessions levels and other (13.3.1R(1)) arrears management and what steps you take to management information which relates to TCF. Principle 6 of treating ensure fair dealing with them. You test your consumer literature to make sure it is clear customers fairly requires a firm How you ensure that the individual circumstances and easy to understand. to pay due regard to the of each customer are taken into account and a one Your call centres are adequately resourced to minimise call interests of customers and treat size fits all approach is not used. waiting times and reduce abandoned call rates. They have them fairly. How you treat customers with serious or terminal extended opening hours which enable customers to call at a (Note MCOB rules and the illness, mental health problems (consider referring time which suits them. TCF principles do not to the Money Advice Liaison Group s guidelines) You review individual files to check for individual distinguish between funding on disability. consideration and fair treatment. methods)

4 How you will deal with other exceptional circumstances. How you will make customers aware of how you will treat them in arrears through clear information provided at appropriate points. How senior management is engaged in setting key TCF outcomes in relation to arrears and possessions. If you outsource any of your processes, how you will ensure that third parties comply with TCF. You manage cases pro-actively as you become aware that a payment has been missed. If a customer is in arrears and is also coming to the end of a fixed or discounted rate period, you contact them in advance to make sure they are aware of the change of rate, how much more they will need to pay and explain their options to them. You tell customers when they first fall into arrears what the implications of this are and how you propose to act including how often they can expect to hear from you. The CML has provided sample wording for consumer information to help explain the arrears management process, to help customers understand what to expect and to set out how they will treat them fairly. Members can use and adapt as they consider necessary. You give customers a clear contact point in case they have questions. Information is available to all customers, whether or not in arrears, to let them know how they will be treated if they find themselves in arrears. You undertake a TCF gap analysis on arrears handling policies procedures and outcomes to assess whether customers in arrears are being treated fairly. You use the results of the gap analysis to improve procedures and to develop management information to measure whether customers are consistently being treated fairly. You remind customers about how to complain if they are unhappy about the way they are treated in arrears. You require any third party servicers and others involved in the collection process such as lawyers and asset managers to treat customers fairly, clearly publicise their complaints procedures and discuss complaints with you. You have procedures for monitoring this. The monitoring of third parties should not rely solely on service level agreements but should include TCF outcomes for customers.

5 1.1 What your policy must include MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Firms should make sure that their written policies include: Using reasonable efforts to reach agreement with the customer over the method of repaying any shortfall (13.3.2E (1)(a)) Liaising with a 3 rd party source of advice if the customer makes When and how you will contact customers, including how soon after a missed payment you will try to contact them. The strategies used to try to contact customers at which point (eg specialist teams, phone calls, letters, auto diallers, use of debt counsellors). What constitutes reasonable efforts to reach agreement with customers. What happens if a customer breaks an arrangement to pay and how this is communicated. How customers are given information about free independent debt advice agencies, encouraged to contact them and told that you will liaise with a You contact customers immediately when all or part of a payment is missed to check there hasn t been a mistake. If the payment is not made within a reasonable period you contact them again to try to find out why. You explain the implications of falling behind with payments. When an account falls into arrears you may have a methodology for deciding whether the customer is high, medium or low risk in terms of their likelihood to get back on track. You may then have different contact strategies depending on their risk category. For example, you may telephone and write to a high risk customer the day after a missed payment whereas you might leave it longer for a medium or low risk customer. You may also have different approaches for repeat contact for customers of different levels of risk. You may also have arrangements for appointing debt counsellors at different times depending on the level of risk and whether you have been able to make contact with the customer. However, in all cases you should take the customer s individual circumstances into account. You explain the options for repaying the shortfall in writing and/or offer the customer the ability to phone you for a discussion or a meeting to explain face-to-face. Your arrears staff have flexibility to negotiate an agreement and are mandated to seek an arrangement up to an agreed limit beyond that they must refer the case to a senior manager but possession proceedings will not start until that manager has concluded that no arrangement is likely to succeed. You explain the consequences of breaking an arrangement. You write to or call customers telling them which agencies can help them. You encourage customers to contact independent money-

6 arrangements for this (13.3.2E (1)(b)) Adopting a reasonable approach to the time over which the shortfall should be repaid, having particular regard to the need to establish a payment plan which is feasible in terms of the customer s circumstances (13.3.2E (1)(c)) Allowing the customer (unless the lender has good reason not to) to change the date on which the payment is due or the method of making payment and giving the customer a written explanation of its reasons if it refuses the request (13.3.2E (1)(d)) Where no reasonable payment arrangement can be made, considering allowing the customer to stay in the property and sell it (13.3.2E third party if they want this. How you will take individual customer circumstances into account and ensure that the repayment strategy is affordable and sustainable. How sufficient flexibility over the length of time for repayment will be dealt with bearing in mind case law states that a reasonable time for repayment can be the remaining term of the mortgage. How customers will be made aware that they can change the date or method of making payment. The circumstances under which you would not allow customers to change the payment date and the reason for this, for example, is it operational or only possible at disproportionate cost or it would be within the wrong payment period. The circumstances under which customers will be allowed to stay in the property and sell it. How customers will be made aware that they can stay in the property and sell it. advice providers (you may provide a free/subsidised phone line to help them do this or you may even have a direct hot key arrangement where you can transfer a customer direct to an independent adviser). You have a dedicated point of contact within the arrears handling department for enquiries from independent money-advice providers, so queries can be dealt with effectively and in a timely manner. You assess income and expenditure, using a combination of existing information on file (perhaps from the original application), updated using revised income and expenditure statements. This could also be done through any third party that you have agreed to liaise with (eg an independent free debt adviser). Income and expenditure might need to take into account other priority debts like council tax, etc. You check this information to see how reasonable it is, for example, by using recent payslips/bank statements. You suggest that customers seek independent advice before accepting an agreement. You compare your agreements to pay with any decided by the court. You may need to review your procedures if courts are arranging lower payments. When you make contact with customers after a missed payment (either in writing or by telephone) they are told that they can change the date or method of repayment. If you cannot change the payment date or type you explain to the customer in writing why you cannot do this. If no reasonable payment arrangement can be made, you write to or call the customer to explain whether they will be allowed to stay in the property and sell it and how this will work. You help customers to sell their property if they wish to do

7 (1)(e)) Repossessing only where all else has failed. ( E (f)) Customers should be given a reasonable period of time to consider any proposals for payment that are put to them ( G (1)) What steps you go through before taking possession action, including how you try to contact customers and reach an agreement before taking such action and what you do if you are unable to make contact. Who is authorised to make the decision to move to possession action. That your proposals for recovering arrears are clearly communicated to customers, including a time to respond, and that you will allow time for them to seek independent advice this. In some cases it may be appropriate to suspend arrears charges while the sale takes place. You may also consider postponing starting a possession claim while the property is being marketed. If you decide not to allow the customer to sell the property and/or postpone the start of a possession claim you should inform the customer of the reasons for this decision. For example, you may consider that your firm or the customer or both would suffer prejudice if the customer was allowed to remain in possession in order to sell the property. This could arise where the value of properties is falling and therefore it may be in the best interests of both parties for you to take possession in order to minimise the customer s potential losses. You apply for a court order only when o o o All attempts to contact the customer have failed. This might include both telephone and written contact and debt counsellors where used. It has not proved possible to agree an arrangement which is affordable for the customer. The customer has not been able to sustain the payments agreed under the arrangement. You do not take court action where a reasonable negotiated settlement is possible or as a measure to discipline customers into keeping to agreements to repay arrears. Court action should not be taken where an agreement is in place and is being adhered to. If court action is proceeding, consider postponing it if an arrangement to pay is entered into after the papers have been filed with the court.

8 1.2 What your policy may include There are also a number of things that lenders may do with the customer s agreement. These are optional and the guidance offers suggestions for what should be taken into consideration. MCOB guidance Policy good practice examples. Your policy states - Procedure good practice examples: Extend the loan term (to When this might be appropriate and how it is Each case should be considered on its merits and there minimise the monthly cost and spread the cost over a longer period) (13.3.4G(1)(a)) communicated to the customer. should be a discussion with the customer as to what might suit their particular circumstances. For example, if their income is reduced but they can still afford to pay a monthly sum, extending the loan term might be appropriate. A change from repayment to interest-only might be appropriate for a short period of reduced income, for example, through job loss. Staff are trained to ensure that they can identify suitable options for customers and are aware of the limits of their authority. They should also know when to consult a Change the type of mortgage (for example from repayment to interest-only) (13.3.4G(1)(b)) Defer payment of the amount owed (13.3.4G(1)(c)) Treat the payment shortfall as if it was part of the original amount borrowed. (13.3.4G(1)(d)) When this might be appropriate and how it is communicated to the customer. Under what circumstances you might allow a deferment of payment (for example, where there is a temporary shortfall because of illness or loss of job) and how this is communicated to the customer. The maximum period you might allow this to continue. When and how is the position reviewed? (A long-term reduction in income is likely to need a different approach to a short-term one.) How the shortfall would be treated when payments resume at a normal level. When capitalisation might be appropriate and how this is communicated to the customer. Whether there are conditions attached to capitalisation (for example, having made regular supervisor for advice. See above Your discussions with the customer provide an opportunity to explore whether the customer is experiencing a difficulty that might be resolved by deferring payment for a short period (for example there is a temporary shortfall because of illness or loss of job). You might also consider whether a reduction in payments might be appropriate for a period. If payments are reduced or deferred you consider what happens to charges and interest during this period. Staff are trained to identify cases where capitalisation might be appropriate including what conditions need to be met before capitalisation can be considered. You explain what capitalisation means and ensure that the

9 (Capitalising the debt). Capitalisation should not be automatic (13.3.5G). payments on the account for a specified period before capitalisation, only capitalising where the total amount would remain within a specified LTV, only allowing capitalisation to happen a certain number of times within a single mortgage contract). How you ensure that the customer is fully aware of the implications of capitalisation (including any increases in monthly payments and reduction in equity). How affordability is considered following capitalisation. customer understands the implications of capitalisation (eg that the overall amount of the debt is increased and that they will be paying interest on a higher amount) If you and the customer agree that it would be affordable, add the debt to the loan account. In some cases it might be appropriate to combine capitalisation with extending the term of the loan.

10 2. Practices and procedures for ensuring arrears and possession policies are followed 2.1 Record keeping MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Lenders must make and keep How records will be kept and maintained. (for 1 year after the debt was If you outsource, how your agreement with the cleared) records of their dealings with customers in arrears. (13.3.9R) The record servicer will ensure that suitable records are kept and that they can be accessed and interrogated by you. must include: The date of the 1st communication. Name and contact number of the employee dealing with that correspondence. Information relating to any new payment arrangements. The date of issue of any legal documents. The arrangements made for sale following repossession (whether legal or voluntary). The date of any communication summarising the customer s outstanding debt following sale. ( G) Where the loan is a business loan the basis for issuing tailored information. Your systems for recording information are clear so that all staff who are likely to have contact with the customer can understand the customer s situation easily without requiring the customer to explain their circumstances on each occasion of contact. Staff have time to record clear information and update records following communication with a customer. You maintain clear and consistent details of the customer s financial circumstances using income and expenditure forms. You check the quality of your record-keeping by, for example, monitoring phone calls and comparing with records made. You keep records of phone conversations for an appropriate period of time (for example, 1 year after the debt is cleared) - recordings may be needed in complaints handling and for staff training All records, including those of telephone calls, can be easily retrieved and interrogated.

11 2.2 Information for customers MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Lenders must give customers All prescribed information, including the FSA s who fall into arrears (as defined) the following Money Made Clear leaflet, is sent out at the appropriate time. information, within 15 business days of becoming aware that the customer is in arrears. ( R) The current FSA prescribed arrears leaflet A list of the payments wholly or partly missed The total sum owed Charges incurred as a result Total outstanding debt, excluding any charges that may be added on redemption An indication of the nature (and where possible level) of the charges the customer is likely to incur. You tell customers about your arrears and possessions process either through your own wording or that based on CML model wording. You carry out regular checks to ensure that the correct information is sent out. The information in the arrears statements is clear and presented in a way which will be easily understood by customers. Charges are easily identifiable and comply with published tariffs. (Note: The FSA has stated that statements are difficult to understand when they:- have multiple debit and credit entries for one fee when it is being added to the mortgage account; or do not make clear whether the outstanding debt figure on the statement includes the arrears and associated charges. ) You check with customers to ensure that they understand the information that has been sent to them. When calculating charges for inclusion in statements, you consider carefully whether it is fair to include the charge at all (see separate section on charges). MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Where a lender is making How information is provided in accordance with You check regularly that statements are being provided at charges on the arrears, it must this requirement. the correct intervals. provide a regular (at least once a The information in the arrears statement is clear (see above quarter) written statement of the payments due, the actual payment shortfall, the charges section) and presented in a way which will be easily understood by customers. Charges and the level of shortfall are easily identifiable. incurred and the debt. This Charges set out in the statement match published tariffs. requirement applies even if the The information sent to customers is checked to ensure that

12 customer is making payments in accordance with an agreed plan. (13.5.1R) NB This requirement also applies where properties have been taken into possession but not sold and where there is a sale. it is clear and easily understandable When calculating charges for inclusion in statements, you consider carefully whether it is fair to include the charge at all (see separate section on charges). MCOB guidance Policy good practice examples. Your policy states: Procedure good practice examples: If interest is applied to the How interest is applied and how this impacts on the You check that statements are being sent out when amount of the arrears on the provision of statements. appropriate. same basis as it is applied to the How frequently you send statements. rest of the mortgage, the lender does not need to send a written statement unless other charges are also being made. If interest is applied in a different manner (ie at a higher rate, for example, standard variable rate (SVR)) then a written statement will be required. (13.5.2G (1)). Written statements may be sent more frequently than once a quarter the lender must consider what new charges it is applying and the number of transactions on the account. (13.5.2G (2)

13 2.3 Avoiding undue pressure on customers MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Lenders must not put pressure How you will comply with this requirement. You review your communications regularly to check on customers through excessive If you outsource, how your agreement with the frequency and tone. phone calls or correspondence, servicer will ensure compliance with this There are processes in place to check servicers or by contact at an unreasonable hour (after 9pm and before 8am). (13.5.3R). requirement. compliance. MCOB guidance Policy good practice examples. Your policy states Lenders should have regard to How you will capture relevant information about customers circumstances and when it might/might not be appropriate to contact any knowledge they might have customers. of a customer s work pattern or How you will monitor compliance with this religious faith which might requirement make it unreasonable to make contact between these hours

14 3. Possession Action 3.1 Before starting action for possession MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Lenders must How you will provide all the prescribed Give the customer a written information. update of all the information How you will check that all reasonable attempts to already prescribed; Tell the customer to find out from his local authority resolve the position have been made before bringing possession proceedings and that staff have a clear understanding of those procedures whether he may be eligible for local authority housing; and Clearly state the action that will be taken with regard to repossession. (13.4.5R) If there are subsequent financial charges registered against the property you consider how to communicate with the other chargee(s) to avoid duplication of costs for customers. When contacting customers you remind them that they risk losing their homes if they take no action and that they should:- o contact you immediately o consider taking independent free debt advice o attend the court hearing. 3.2 Marketing a property in possession MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: The property must be How you will assess the best price and ensure proper marketed as soon as marketing possible and sold for the This will include procedures to consider whether use best price that may reasonably be paid. of auctions is appropriate or whether other methods of sale would realise a better price. (13.6.1R) The lender may/should take into account any legitimate reasons for deferring the sale. (13.6.3R) If the proceeds of sale are less than the debt, the lender must tell the customer: How you will check and audit your records to make sure that shortfalls are identified and explained to the customer. You consider the type of property and whether to use local, national or specialist agents. Where asset managers are used you have procedures to ensure best practice and complaints monitoring. You review marketing results regularly with the aim of striking a balance between achieving the best possible price for the properties against the costs the customer is incurring while waiting for a sale. You comply with the CML voluntary shortfall agreement. All reasonable efforts are made to contact customers to pay surpluses.

15 o What the shortfall is. o That the shortfall may be pursued by another company (where this is the case). o If the lender intends to recover the shortfall: if it does, notification must be given within 5 years of the date of the sale (in Scotland) or within 6 years in all other cases. (13.6.4R) How you will ensure surpluses are paid promptly with a clear explanation as to how the final figures have been calculated. Where a shortfall is pursued by another company you have procedures for monitoring that the company is treating customers fairly. What happens if customers cannot be contacted and payment cannot be made. Where the surplus is paid to a subsequent chargee this is explained to the customer. If the proceeds of sale are more than the debt the lender must tell the customer and repay the surplus. (13.6.6R)

16 4. Debt counsellors MCOB guidance E refers to lenders liaising with third party sources of advice if the customer makes arrangements for this. (Note: There is nothing to prevent lenders initiating the use of third parties, such as debt counsellors, if they think this may be helpful.) Examples of good practice You clearly explain the role of debt counsellors to customers in communications (including phone calls) and explain that other free sources of independent debt advice are available. That if you charge customers for debt counselling, o this is made clear; o charges are fair and reasonable and reflect actual cost; and o customers are allowed sufficient time to decline if they choose. You have procedures for monitoring that counsellors have treated customers fairly. You undertake quality control, for example, by comparing arrangements to pay made by debt counselling companies with those ordered by the court. If there are circumstances where you may send a debt counsellor without the customer s permission (for example after a certain number of missed payments, if you have not been able to contact the customer and/or if there is no arrangement in place) this is clearly explained to the customer in communications. You give customers the opportunity to make appointments which are convenient to them. If you have agents who collect money on your behalf the FSA has suggested that they are referred to as field collection agents rather than debt counsellors. 5. State support and MPPI MCOB guidance MCOB is silent on the customer s potential eligibility for state support or whether they may have relevant payment protection insurance. Examples of good practice You have a clear policy as to what you will do if there is an MPPI policy. You will ask customers if they have MPPI cover and check your own records for any evidence of this. You will remind customers to check whether they are eligible for any state support (ISMI in particular) and how this will impact on your decision to take any further action (for example, whether ISMI meets the payment in full or how the shortfall is dealt with if it does not). You provide information about free debt advice agencies to assist with any claim.

17 6. Management information (MI) and quality control MCOB requirement Policy good practice examples. Your policy states Procedure good practice examples: Management information What management information will be collected (including TCF measures). How this information will be reported to and reviewed by the Board. Quality control How your quality control procedures will ensure delivery of TCF Management has access to relevant and timely information which is used to monitor and control the effectiveness of mortgage arrears handling practices. You use both qualitative and quantitative information to assess whether you are treating customers fairly. For example you: o ask customers about their experience during the arrears process and include their responses in your MI. o review the effectiveness of arrangements to pay: if the rate of adherence is poor, you review your procedures. o compare the performance of arrangements you have made with customers to repay arrears with court decisions on repayment plans. If courts arrange lower repayments, you review your procedures. o use MI to inform arrears handling polices and practices and possibly other activities within the firm such as underwriting practices particularly on affordability You ensure proper MI is obtained where arrears handling is outsourced. You have in place rigorous systems of quality control monitoring to ensure adherence with arrears handling procedures, including with outsourced services the results are fed through to management information. You implement random reviews of individual cases, including expenditure and income assessment to ensure fair and proper treatment (in some cases all cases are reviewed by someone else in the organisation). Decision processes are recorded and retained. You implement a staff training programme, including refresher training.

18 You monitor complaints to see what learning can be gained. You encourage staff to challenge the policies if they believe they are contrary to TCF. You undertake internal and external audit of the process. You check that the full range of tools provided for in the arrears policy is in place and being offered to customers. You review the content of customer communications to ensure that information is stated clearly, accurately and fairly. Where you have processes for staff to follow (for example, a computer system where certain screens and information must be completed), the policy underlying the process is clearly understood. You have clearly designated levels of authority. Staff are clear when they should refer to someone more senior and are encouraged to do so. Your quality control includes o checking the appropriateness of agreements that have been put in place; o monitoring the range of tools in place; o regularly reviewing customer communications to ensure information is stated clearly and accurately (consider external assessment); o recording and monitoring phone calls; and o measuring individual staff performances on qualitative as well as quantitative bases. Review of policies Policy good practice examples. Your policy states Procedure good practice examples: A firm must put in place and How your policy will be reviewed, by whom and All reviews are agreed/signed off by your Board. operate in accordance with a how often. All appropriate information is taken into account at the written policy (agreed by its governing body) and procedures review such as input from management information/complaints/ customer surveys etc. for complying with MCOB (1) - ( )

19 7. Other considerations 7.1 Training and competency of staff 7.2 Customer contact 7.3 Courts and court agents Training and competency of staff (No specific MCOB requirement but all firms are covered by the "competent employees" rule in the main Handbook. SYSC 3.1.6R provides that all firms must "employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them.") Examples of good practice:- You have a training programme that ensures consistency of approach and understanding of policy and TCF. There are formal sign-off requirements for trainees. Procedures for induction and refresher training for all staff are recorded. You monitor all staff regularly to maintain standards. The monitoring of staff is tailored according to their experience and their assessed performance standards, so that supervision is more intensive for new or poorly performing staff. Remuneration structures reward, rather than discourage TCF. Performance is measured using quality measures, such as the number of arrangements customers have adhered to, and bonuses are set accordingly. Customer contact (No specific MCOB requirement) Courts and court agents (No specific MCOB requirement other than E (1)(f)) Examples of good practice:- Your system facilitates quick and easy contact by customers, advice agents and court agents; You have customer-friendly contact facilities. This includes o Showing your call centre number on all correspondence. o Resourcing your call centres to ensure minimal call waiting times and low abandoned call rates. Your call centres are open outside usual office hours (note MCOB R); Examples of good practice:- You have systems to ensure that all reasonable attempts to resolve the position have been made before bringing proceedings. You clearly document all correspondence/contact with the customer from the point the first payment was missed in part or in full, so that you can show that you have acted fairly and reasonably. The FSA has stated that it does not consider it good practice to use court action to discipline customers into keeping to agreements to pay arrears. Use of suspended possession orders is therefore monitored carefully. If the customer makes an arrangement to pay once proceedings have commenced, you consider whether legal action

20 should be stayed. Your court agents are properly instructed and able to be flexible in making any arrangement to pay on your behalf. They are fully informed about the case so that they can satisfy the court that all reasonable attempts to resolve the position have been made. Statements showing arrears to the court distinguish between arrears and charges. 7.4 Outsourcing MCOB guidance Policy good practice examples. Your policy states Lenders which outsource How you will ensure that, if you outsource activities, activities (eg debt collection) your policies are followed. This includes will remain responsible for what o Collecting relevant management information. happens. (13.3.8G) o Monitoring complaints and complaints handling by the servicer. o Checking that your servicer treats customers fairly. 7.5 Arrears charges No MCOB 13 specific requirements but see MCOB 12 Examples of good practice: - You have systems to check whether the imposition of charges is reasonable Your arrears charges reflect a reasonable assessment of the cost of the additional work to you of dealing with customers in arrears. You should not set fees by benchmarking against those set by other firms, without reference to your own costs. You have a process for regularly reviewing and updating charges. You waive charges where the customer is complying in full with an agreement to pay. You ensure customers are made aware of arrears charges during phone conversations as well as in correspondence (MCOB requires you to send a statement at least quarterly). Where a direct debit request is rejected by the customer s bank you give the customer sufficient time to investigate and attempt to rectify the situation before making a further attempt.