Yabber Global

Loan defaults – mitigating the risk

Mortgage markets across the Globe have faced several headwinds over the last couple of years.  In the UK it was not long ago that the Bank of England was warning that a ‘disorderly’ Brexit could result in a deeper and more damaging recession than the 2008 financial crisis.  Other headwinds have presented a more global challenge; for example, the macroeconomic post COVID reset.  The ongoing challenges are raising concerns, but potential loan defaults are specifically attracting attention.  
Over the next few months, we will see the end of the government’s furlough scheme, the unwinding of payment deferral concessions, household budgets put under strain as workers return to offices (some having to bear travel costs again) and we will see increasing mortgage costs as central bank attention turns from trying to boost the economy to trying to control inflation.  It is not surprising then that the recent Bank of England credit conditions survey highlighted lenders expectations for an increase in default rates in Q3.  

While the COVID crisis meant that lenders focus on collections largely took a back seat during the last 18 months, they should not forget that less than 2 years ago a major UK banking group was fined £64m in respect of arrears and forbearance failings.  Add the recent warning that the FCA is to become more proactive and the cost of non-compliance becomes a real risk issue for most financial service businesses.  Remembering that fine, the regulator focused on call hander oversight shortcomings.  The weaknesses included inappropriate categorisation of call outcomes, inadequate information gathering, lack of training and a rigid adherence to a payment arrangement framework.  Additionally, there was “no MI which attempted to identify issues before they had crystallised and therefore were evident through testing”.  Sadly, traditional testing volumes were woefully low and exacerbated the issues.  

This is where Yabber can help by working with firms to improve compliance, reduce costs and increase revenue while monitoring 100% of call centre interactions.  To learn more, arrange a demo of the system or simply have a chat, give us a call to find out how we can help.