04 November 2014
Improving customer experience with the personal touch
While the FCA has stated that arrears management in firms has improved since the last review, it is urging the industry to place a greater emphasis on delivering consistently fair outcomes for customers based on their individual circumstances.
This has certainly been an area that we have taken seriously, particularly as economic conditions have gradually improved over the past 18-24 months.
The Mortgage Market Review aims to limit high-risk borrowing or at least to ensure that it is carried out in the correct way. As a result, it has the potential to lessen the burden on arrears management resources.
However, people without good credit records still need to borrow or they already have borrowings. These cases need to be handled in the right way to ensure borrowing does not become bad debt.
As a provider of business process outsourcing solutions from loan origination through to possession, we have been reviewing our approach to sub-prime customers and their clients and it has been a challenging but rewarding journey.
Whether dealing with small sub-prime portfolios or much larger ones, we firmly believe that taking a more personal approach is the way forward.
Strategies to improve the customer experience
It is critical to treat people with sensitivity appropriate to their circumstances; often people do not want to talk and be open about
their financial issues, so the focus must be on reaching realistic, sustainable payment arrangements supported by income and expenditure information.
The impact that a phone manner can have on the long-term customer relationship should not be underestimated, and asking the right questions in the right way, will generate more productive and honest answers.
Sometimes it is necessary to put people in touch with agencies that can provide direct assistance, such as the debt advice agency Step Change.
Robust call-making frameworks on which a call is scored can help to review standards. This avoids scripting and enables a sensible and rational conversation to take place which delivers the right outcomes for both the customer and our clients.
It is also possible to apply this approach to help identify pre-arrears cases, looking at a number of early indicators to see if there is the likelihood of something going wrong further down the line. This could be the risk of losing work or taking maternity leave, as well as potential health issues which could impact a person’s ability to make repayments.
To a lender, this improves predictability on any given case, can help with forecasts and avoids the need for costly chasing of payments.
Impact on the wider industry
It’s important to think of sub-prime arrears in the context of the wider market. MMR is changing the way many lenders will operate, with particular focus on customer relationships and the advice process. At the same time, Help to Buy is bringing new customers through lenders’ doors in their thousands, placing greater demands on the industry. It is therefore a good time to consider customer relationships and to ensure that everything possible is being done to ensure customers have a seamless journey
Under MMR, as customers have the choice between execution-only or advised sales channels, those who choose to seek advice will be looking for a time-efficient service.
Affordability checks are an important part of the advice process, which can help to reduce incidences of arrears, and technology can help to ease the administrative burden associated with these. Responsibility for affordability checks will pass from brokers to lenders following the introduction of MMR on 26 April, and the FCA has already stated that it will review the market six months after its implementation.
The need to demonstrate compliance and the resulting reporting requirements will also drive demand for technology that can automate
In a recent survey from the Intermediary Mortgage Lenders Association, 36 per cent of lenders said they are concerned about the practicalities of implementing the regulations, pointing to issues of costs and efficiency. Loan origination and administrative systems that can streamline, and in some cases automate, a large part of the advice process will help to drive efficiencies and regulatory adherence post-MMR.
Effective suitability reports are also an essential part of sub-prime lending. An important aspect of any loan origination system is the ability to generate suitability reports reflecting the customer’s individual mortgage needs. Systems exist that allow this report to be highly personalised to ensure the best advice is being given.
A well-executed and followed-through suitability report will also,
we hope, help to reduce the likelihood of people getting into arrears.
While it can never help to control unexpected events, it can reduce the likelihood of arrears as a result of customer circumstance as they can
be more fully understood, documented and checked during the advised
Sub-prime lending is an important part of our industry and the key is to take a personal approach throughout the advice process. Individual circumstances must be taken into account and handled sensitively.
As the industry takes time to reflect upon the FCA’s review of arrears handling and MMR takes hold, it will be interesting to see how the advice process develops.
One thing is clear – there will be a greater emphasis on offering personalised, clear advice in a way that is both compliant and time-efficient.