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  • Robert Bell

Borrowers In Financial Difficulties: Time To Take Action

The pandemic had an unprecedented impact on customers, many suffered reduced income and others, unfortunately, job losses. However, this was generally successfully managed through firms’ long standing financial difficulties procedures. The FCA also acted through their Payment Deferral Guidance and Tailored Support Guidance for Mortgages as well as for Consumer Credit.

Keen to understand the success of the Tailored Support Guidance [TSG] the FCA quickly undertook a review releasing a report in March 2021. The Regulator found firms had progressed well at implementing the guidance, although it did identify some concerns. Building on this work the FCA launched the ‘Borrowers in Financial Difficulties’ project in Spring 2021.

Interim findings were released in January 2022, followed up by a summer Dear CEO letter reminding firms of the standards they need to meet as consumers are hit by the cost of living crisis. You can read this letter here.

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Concerned by the rises in the cost of living - demonstrated through inflation reaching 10%, energy prices exploding, the end of government backed loan schemes and expected rises in mortgage rates - the FCA are placing greater importance on this topic, resulting in the release of their key findings in November 2022.

Their concerns have been compounded by data from July 2022 showing credit card lending at its highest rate in 17 years, coming at a time when the population is taking a wage cut in real terms. The November report focused on the forbearance strategies of firms. Following the review of 69 firms they identified four key areas where improvements could be made:

  1. Engaging with customers

  2. Effectiveness of conversations with customers

  3. Helping customers to consider third party support

  4. Fees and charges.

It’s time for you to take action in each of these four areas, let’s explore what you can do.

Engaging with customers

Firms can do more to proactively engage with customers at the point in time that payment problems start to accrue. Firms should focus on their procedures for the point at which a customer indicates they expect to experience payment problems, so that support is expressed to customers in a way which is aimed at overcoming the typical barriers of disclosure, such as psychological barriers.

Following this firms must ensure they engage with customers after an actual missed payment using a range of channels, in doing so firms should be conscious of setting the right tone. As part of this, firms should take steps to reduce friction in order to keep the process as simple and straightforward for customers as possible. For example, customers shouldn’t be passed from one department to another and adequate notes should be taken in order to prevent the need for re-disclosure.

Effective conversations

The headline here is ’ineffective conversations lead to customers agreeing to unsustainable payment arrangements or options.’

Another key message is that firms rely too much on payment arrangements, often ignoring other options such as interest rate reduction, extending the term of the loan, or properly considering how the customer’s situation is expected to change over time.

Fees and Charges

The FCA was fairly critical of firms increasing the level of debt through charges when a person has been identified as suffering financial difficulties. Whilst they don’t go as far as saying such charges should be banned, they do highlight the importance of structuring charges in a way which does not overly adversely impact customers in financial difficulties or trap a person in a cycle of debt.

Helping customers obtain third party support

They found that most firms included signposting to third party debt advice in written communications, however they missed several opportunities to inform customers of the support available during telephone conversations. Clearly, the FCA says, this is a training issue.


In their findings the FCA highlighted a lack of training as a key finding resulting in poor outcomes for customers, whether introductory or refresher training. RB Compliance can help firms here, we have a range of e-learning courses which can be reviewed here, including our Financial Difficulties course.

Priced at just £20 per user, the courses are accessible at the delegate’s convenience and provide a certificate upon successful completion, allowing firms to track and record each user’s progress.

For large groups, we can offer several corporate packages.


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