MCOB 13.3 4Dealing fairly with customers: policy and procedures

1. (1)

   A firm must deal fairly with any customer who:

   1. (a)

      has or may have payment difficulties in respect of7 a regulated mortgage contract or home purchase plan;1

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   2. (b)

      has a sale shortfall; or1

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   3. (c)

      is otherwise in breach of a home purchase plan.

2. (1A)

   For the purposes of MCOB 13, a customer has or may have payment difficulties if:7

   1. (a)

      the customer has a payment shortfall;7

   2. (b)

      the customer indicates to the firm that they are at risk of falling into payment shortfall; or7

   3. (c)

      the firm otherwise becomes aware that the customer may be at risk of falling into payment shortfall.7

3. (2)

   A firm must put in place, and operate in accordance with, a written policy (agreed by its respective governing body) and procedures for complying with (1). Such policy and procedures must reflect the requirements of MCOB 13.3.2A R and MCOB 13.3.4A R.3

4. (3)

   A firm must ensure that the effectiveness of any policies and procedures put in place further to paragraph (2), and the firm’s compliance with them, is reviewed at appropriate intervals.7

1. (1)

   4Where a customer has a payment shortfall in relation to a regulated mortgage contract or home purchase plan, a firm must not attempt to process more than two direct debit requests in any one calendar month.

2. (2)

   Where a firm’s direct debit request, in respect of a customer who has a payment shortfall on a regulated mortgage contract or home purchase plan, has been refused, on at least one occasion in each of two consecutive months, due to insufficient funds, the firm must:

   1. (a)

      consider whether the method of payment remains suitable for the customer;

   2. (b)

      make reasonable efforts to contact the customer to discuss whether the method of payment remains suitable for the customer; and

   3. (c)

      not pass on any costs to the customer which were incurred as a consequence of presenting direct debit requests during this period of consideration.

5A firm must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers whom the firm understands, or reasonably suspects, to be 7vulnerable.

3A firm must, when dealing with any customer who has or may have7 payment difficulties:

1. (-1)

   where appropriate:7

   1. (a)

      inform a customer that free and impartial money guidance and debt advice is available, including from not-for-profit bodies;7

   2. (b)

      effectively communicate the potential benefits of accessing free and impartial money guidance and debt advice, and the range of channels through which it is available; and7

   3. (c)

      signpost or refer the customer to suitable sources of free and impartial money guidance or debt advice;7

2. (1)

   make reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall4 or sale shortfall, in the case of the former having regard to the desirability of agreeing with the customer an alternative to taking possession of the property;

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3. (2)

   liaise, if the customer makes arrangements for this, with a third party source of advice regarding any7 payment shortfall4 or sale shortfall;

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4. (3)

   allow a reasonable time over which any7 payment shortfall4 or sale shortfall should be repaid, having particular regard to the need to establish, where feasible, a payment plan which is practical in terms of the circumstances of the customer;

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5. (4)

   grant, unless it has good reason not to do so, a customer's request for a change to:

   1. (a)

      the date on which the payment is due (providing it is within the same payment period); or

   2. (b)

      the method by which payment is made;

      and give the customer a written explanation of its reasons if it refuses the request;

6. (5)

   where no reasonable payment arrangement can be made, allow the customer to remain in possession for a reasonable period to effect a sale; and

7. (6)

   not repossess the property unless all other reasonable attempts to resolve the position have failed.

3In complying with MCOB 13.3.2A R, a firm must give a customer a reasonable period of time to consider any proposals for dealing with the payment difficulties.

3In complying with MCOB 13.3.1R(1) and MCOB 13.3.2AR(6) in respect of customers who have or may have payment difficulties:7

1. (1)

   a firm must consider whether, given the individual circumstances of the customer, it is appropriate to do one or more of the following in relation to the regulated mortgage contract or home purchase plan with the agreement of the customer:

   1. (a)

      extend its term; or

   2. (b)

      change its type; or

   3. (c)

      waive or7 defer payment of capital and/or7 interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall); or

   4. (ca)

      reduce the interest rate being charged to the customer, or apply simple interest instead of compound interest; or7

   5. (d)

      treat a7 payment shortfall4 as if it was part of the original amount provided (but a firm must not automatically capitalise a payment shortfall where the impact would be material4); or

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   6. (e)

      make use of any Government forbearance initiatives in which the firm chooses to participate;

2. (2)

   a firm must give customers adequate information to understand the implications of any proposed arrangement and of not agreeing an arrangement. This information must include the potential impact on the customer’s overall balance and how it will be reported to the customer’s credit file7.

3. (3)

   a firm must:7

   1. (a)

      take into account the effect of any potential arrangements on the customer’s overall balance; and7

   2. (b)

      take reasonable steps to ensure that any arrangements with customers in payment shortfall remain appropriate.7

4In MCOB 13.3.4A R, the impact of a capitalisation would be material if, either on its own or taken together with previous automatic capitalisations, it increased:

1. (1)

   the interest payable over the term of the regulated mortgage contract by £50 or more; or

2. (2)

   the contractual monthly repayment amount under the regulated mortgage contract by £1 or more.

3A firm must make customers aware of the existence of any applicable Government schemes to assist borrowers in payment difficulties in relation to regulated mortgage contracts.

1. (1)

   A mortgage lender or administrator 1must make and retain an adequate record of its dealings with a customer who has or may have payment difficulties, or7 whose account has 7 a sale shortfall1, which will enable the firm to show its compliance with this chapter1. That record must include a recording of all telephone conversations (including video calls)7 between the firm and the customer which discuss any amount in arrears or any amount subject to payment shortfall charges4.3

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2. (2)

   A mortgage lender or administrator 1must retain the record required by (1) for three years 3from the date of the dealing.31

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