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 Financial Conduct Authority. 

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

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

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

It points out: “Some firms had considered implementing 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 firms had clear communication plans to support customers throughout the product lifecycle beyond that offered to customers who were not using mortgage products to consolidate debt.” 

But the body adds: “It was disappointing that several firms did not consider that consumers were using mortgages for debt consolidation purposes.  

“We remind firms they need to ensure they have meaningfully considered the debt consolidation customer journey where a product allows for debt consolidation.  

“This is the case even where firms may not have specifically designated these products as debt consolidation products.” 

The body 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”. 

It adds that it expects firms to comply with: 

• the Consumer Principle, which requires firms to act to deliver good outcomes for retail customers 
• the cross-cutting rules for firms to act in good faith towards retail customers, avoid causing foreseeable harm to retail customers, and enable and support retail customers to pursue their financial objectives, and  
• our outcomes rules on the design of products and services, price and value, consumer understanding and consumer support 

The regulator adds that its review is also useful for firms “when considering what changes they need to make to closed book products as we head towards the 31 July 2024 implementation deadline for closed products and services”. 

The wide-ranging review also looked at firm’s treatment of customers in financial difficulty, dealing with bank accounts of deceased or incapacitated customers, fraud and security breaches and business current accounts.