How to review forbearance arrangements with an AI agent

Forbearance reviews fail most often by not happening. The agent tracks every arrangement's end date, gathers how the customer has performed, checks the account's classification, and drafts a review with the options your policy allows. A named person decides whether to extend, step up, return to normal terms or move to a longer-term solution. The agent then records the decision.

What is a forbearance review, and who owns it?

Forbearance is a concession to a borrower in financial difficulty: reduced payments, a payment holiday, a term extension, interest suspended for a time. Every arrangement should have an end date or a review date. At review, the lender asks whether the customer's situation has changed, whether the concession is still right, and what happens next. The same review checks that the account is classified correctly, because forborne loans are treated differently in impairment and regulatory reporting.

Collections or financial support teams own customer outcomes. Credit risk owns classification and impairment. In the UK the FCA Consumer Duty frames the outcome question: are customers in difficulty getting good outcomes? The agent's job is to make sure no arrangement drifts past its date unreviewed, and that each review starts from the full picture.

What are the steps?

1. Agent, depth 1: lists reviews due. Every arrangement reaching its review or end date within the notice period, plus arrangements where something has changed early, such as a missed reduced payment.
2. Agent, depth 1: gathers the picture. Payments made under the arrangement, balance movement, contact history, the most recent income and expenditure assessment, vulnerability markers.
3. Agent, depth 1: checks classification. Whether the account carries the right forbearance and arrears flags for impairment and reporting, and whether any flag should change under credit risk's rules.
4. Agent, depth 2: drafts the customer contact. A request for updated circumstances, sent by a person or, once certified, through an approved template at depth 3.
5. Agent, depth 2: drafts the review. What happened under the arrangement, what has changed, and the options policy allows, each with its effect on the customer's payments and balance.
6. Person: decides. Extend, step up gradually, return to contractual terms, or move to a longer-term solution.
7. Agent, depth 3: records the decision. New dates, payment amounts and flags in the servicing system, exactly as decided.
8. Agent, depth 1: reports outcomes by group. For quality review: customers who returned to arrears after their arrangement ended, by arrangement type and customer group.

Which controls apply, and what evidence does each leave?

No arrangement ends unreviewed. The agent produces a daily list of arrangements past their date with no decision recorded. Evidence: the list, and the date each item cleared.

Options from policy only. The agent's draft offers only the options your forbearance policy allows for that product. An option outside policy cannot be offered, though a person may still choose one with a recorded exception.

Classification changes held. The agent proposes flag changes; credit risk confirms them. Evidence: the proposed change, the rule applied and the approver.

Decision recorded exactly. The system update is compared with the filed decision before it is saved. Any difference is refused.

Vulnerability markers read-only. The agent cannot clear or change them.

What should you measure?

• Arrangements past their end date without a recorded decision. Should be none.
• Customers back in arrears within a few months of an arrangement ending. Suggests step-ups are too steep or reviews too thin.
• Repeated extensions on the same account. Long chains of short concessions can hide the need for a longer-term solution, and they can hide losses.
• Classification errors found by credit risk.
• Outcomes by customer group. Differences need explaining.

Where does it usually go wrong?

Silent expiry. The holiday ends, full payments are taken, the customer cannot pay, and the account falls into arrears that the arrangement was meant to prevent. The daily list exists for this.

Rolling over by default. Extending is the easiest decision and avoids an awkward conversation. It can also leave a customer in limbo for years. The draft should say how many extensions there have been and what the long-term options are.

Pressure in the contact. A request for updated circumstances that reads as a demand will not get honest answers. Keep the template supportive and give people a way to talk to someone.

Flags cleared too early. A customer who pays for a short time is not necessarily out of difficulty. Classification changes follow credit risk's rules, not the agent's impression.

Reporting out of step with servicing. The servicing system shows the arrangement has ended, but the impairment and reporting flags still show it as live, or the other way round. The agent should compare the two every time it records a decision and report any mismatch to credit risk.

Whether an agent can agree the arrangement in the first place is a separate question, answered in whether an agent can agree a payment holiday or forbearance plan. If outcome reporting shows that a group of customers was harmed, treat it as you would an incident and run a post-incident review. The general bounds are in AI agents in banking.