As many readers will know, the FCA is currently consulting on measures to address persistent credit card debt. The consultation doc CP17/10 was published in April 2017 and a policy statement is due from the FCA in the final quarter of the year.
Unless you are in the credit card world, this consultation may have passed you by, but it does signal to lenders a shift in the attitude of the FCA to expect lenders to provide enhanced forbearance and promotes Payment Waiver.
Following the demise of creditor insurance, lenders pretty much stopped offering any form of protection to their customers. ‘Protection’ became a dirty word….as did ‘Profit’. But neither Protection nor Profit should be avoided…and there are no rules about not making one from the other. You can Protect your customers and you can make a Profit from doing so.
The push from the FCA for enhanced forbearance is perhaps in response to the lack of protection for customers in the marketplace. A clear concise and unequivocal message to lenders that protecting their customers is not only permissible but is expected.
The exact wording used by the FCA (on no fewer than 5 occasions) is:
“The nature of forbearance, where required, is not prescribed, but it should have the aim of assisting the customer to repay the balance in a reasonable period, and may include reducing, waiving or cancelling any interest or charges to the extent necessary for the customer to be able to repay their balance in a reasonable period”
The part I will highlight is “and may include reducing, waiving or cancelling”.
Waiving or Cancelling interest or charges….. That is quite a statement from the FCA.
For the team at Protection Products who for the past 10 years have been building and promoting Payment Waiver for loans, mortgages, mobile phones, utility contracts and rental agreements, this message from the FCA was monumental.
Having publicly re-stated the historic UK Court decision on Waiver as non-insurance in 2011, the FCA are now advocating Waiver as a part of a firms’ forbearance regime.
So, what is Waiver and what does it involve? In a nutshell Waiver can be for any event, for any duration and Waive any item that a lender wishes. You decide what it looks like and it becomes a contractual promise in your agreement. Here’s where it gets fun. Once you have determined what the waiver looks like to your customer, you can then re-insure that exact same contractual risk away from your balance sheet.
This means whenever you have to make good on your contractual promise to waive a payment that is due to you, you will be reimbursed the exact same amount under your re-insurance plan. Simple. Your customer has a contractual promise. You have insurance.
The basics of Waiver are simple. How to build waiver into your customer agreement and administer waiver activations? Not quite so simple, but I’m guessing you know a firm who can help? Web: www.PaymentWaiver.com Email: info@PaymentWaiver.com
