Our sister company, Rockstead, wrote a blog earlier this month detailing how lenders and servicers were revisiting their arrears resource contingency plans; https://rockstead.co.uk/arrears-contingency-planning/. Since that blog, UK Finance has issued the arrears data for the last quarter of 2021. That data shows the concerns of collections managers were justified.
While some headline writers focused on the fact that there had been a reduction in the number of homeowners in early arrears (those between 2.5% and 5% of mortgage balances), the warnings in the data are bleak. For example, UK Finance highlights that the number of homeowners with more significant arrears (representing 10% or more of the outstanding mortgage balance) has risen. Drilling further into the data, it is also clear to see that the number of buy to let mortgages in arrears also increased. That had been predicted following government reductions in tax relief incentives which reduced the profitability of renting out a property.
However, it is not just mortgage payments that are under pressure; credit reference agency data suggests that household financial pressures are already resulting in growing numbers of people falling behind on consumer credit, motor finance and other loan repayments.
Against this backdrop, providers of finance will recall that less than 3 years ago a major UK banking group was fined £64m in respect of arrears and forbearance failings. The weaknesses included inadequate information gathering, lack of training and a rigid adherence to a payment arrangement framework. Additionally, there was no management information to identify issues before they had crystallised. Effective oversight and testing could have solved these issues.
Despite that fine we know that traditional testing volumes across the sector remain woefully low. This is where Yabber comes in. We can help firms improve compliance and reduce costs while monitoring 100% of call centre interactions; including arrears and collection calls where we have a significant history of reviews and interventions. To learn more, see how independent oversight can help you, arrange a demo of the system or simply have a chat, give us a call to find out how we can help.