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- Robert Bell
FCA Takes Action Over Firms Failing to Treat Customers in Financial Difficulty Fairly
Just before Christmas, we focussed on the importance of the fair treatment of customers in financial difficulty. On 15th December the FCA fined Barclays Bank UK PLC, Barclays Bank PLC and Clydesdale Financial Services Limited (Barclays) just over £26 million for failing to treat fairly customers who fell into arrears or experienced financial difficulties.
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The FCA’s findings, in this case, highlighted three main failures on the part of Barclays:
They failed to follow contact policies for customers who fell into arrears – meaning that customers were not contacted promptly and may have incurred additional fees and charges because of the delays
They failed to have appropriate conversations with customers to help understand the reasons for the arrears
And they failed to properly understand customers’ circumstances, leading it to offer unaffordable, or unsustainable, forbearance solutions.
Although Barclays had identified some of the problems in 2014, systems and controls failings meant that these were not rectified. Barclays acted proactively during the case, contacting customers who were affected and offering them redress or compensation. This action was taken into account by the FCA, and without the redress programme, the fine would have been just over £37million.
One of the issues highlighted was the failure of Barclays’ agents to have ‘appropriate conversations with customers to help understand the reason for the arrears or the customer’s long or short-term financial situation.’ In particular, Barclays’ staff missed indicators of financial difficulty in ‘a significant number of cases’.
The FCA clarify that their forbearance rules mean that firms must take adequate measures to properly understand a customer’s financial position, which information should then be used to appropriately tailor solutions that are appropriate to the customer’s personal circumstances, for example, suspending or reducing interest or charges, allowing deferment of payment of arrears, or accepting token payments for a reasonable time.
The FCA highlight the potential for something to go wrong with the example that a customer who is under pressure may choose to pay a consumer credit debt at the expense of priority expenses such as rent or food. Unless financial difficulties are identified and understood, they cannot be addressed, and if they are not addressed, the customer could suffer financial detriment.
We covered the issue of training staff to identify financial difficulties in our article just before Christmas.
This week, we’ll cover some of the practical aspects – techniques that staff can use to open up the conversation to understand the customer’s personal circumstances so that they can use that information to select appropriate forbearance options. Staff failure to be able to do this consistently was a major finding in the Barclays case, but there are tried and tested methods to help the customer feel comfortable in sharing their circumstances.
The first is active listening. This sounds basic, but it goes further than instructing or expecting front line staff to listen and then act. Once a ‘red-flag’ has been identified, then active listening helps us to build a true picture of how their circumstances are actually affecting the customer. Active listening is about hearing not just what is being said and the way it’s being said, but understanding the full extent of what might be behind those words. For example, if a customer apologises for being late with a payment, and includes a seemingly throw-away comment about having had a lot on their mind recently, this is a key moment. Most of us, in general conversation might accept the comment as a throw away remark, but an active listener understands that there’s more going on, and can use open questions to guide the customer to share more if they would like to. This gives the customer who has lost their job the opportunity to say that to someone who is able to make adjustments to their repayments and make a real impact on their financial wellbeing – something many customers may think wouldn’t be an option.
There are a range of other techniques that have been tried, tested and used across the industry, including the 'set up, start off and stay with' approach – an easy to remember method for staff to guide these sometimes difficult conversations that provides staff with confidence that they are doing the right thing. This method is covered in our online training course.
In Barclays’ case, the FCA are keen to reiterate that their action in this area is ongoing, and fair and appropriate treatment of customers in arrears remains a focus. The FCA suggests that firms ensure there is appropriate investment in their staff who work in collections and recoveries, including in training.
Our dedicated Financial Difficulties dedicated course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers. It also covers recording of the customer’s personal information in line with the General Data Protection Regulation and the Data Protection Act 2018.
This online course, priced at just £15, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
