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- Robert Bell
Support for Consumer Credit Customers
The FCA has confirmed its updated guidance on support measures for overdraft and consumer credit users who are affected by COVID-19.
The guidance is aimed to provide assistance to users of credit cards, store cards, and catalogue credit customers, as well as loan, motor finance, rent-to-own, high-cost short-term credit and buy-now-pay-later customers. The measures apply to customers who have previously received support for difficulties linked to coronavirus, and to customers affected after the current guidance ends on 31 October. The aim of the Guidance is to ensure that tailored support is offered to customers who continue to experience difficulties with payments as a result of coronavirus.
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The Guidance clarifies that firms should have measures in place to understand when customers are approaching the end of their payment holiday, and should offer them tailored support based on their individual circumstances. The support should be offered and in place before the customer misses any payments.
Where a customer needs extra help, firms should be flexible about support options, and have a good range of both shorter and longer-term options available. The aim is to minimise stress and anxiety experienced by customers in financial difficulty.
Firms should also:
Not pressurise customers into repaying debt in an unreasonably short period of time, instead firms should work with customers to set out a reasonable repayment timescale.
Ensure that repayment arrangements are suitable for the customer – that they are affordable, sustainable for the customer over the repayment period and that the arrangements take into account the customer’s wider situation, including other debts and living expenses.
Prevent compounding difficulties by suspending, reducing, waiving or cancelling any interest, fees or charges necessary, based on the customer’s individual circumstances.
Any arrangements that are agreed must be sustainable and take account of the whole picture, including the customer’s debts and expenses. The guidance doesn’t set out any hard and fast rules about how this information should be collected, but does say that firms can use automated processes such as income and expenditure assessments – but whichever method is used, the firm must collect information about the customer’s individual financial circumstances and use this to offer appropriate options. Customers must not be pressurised to repay too quickly, but where a customer offers – without being prompted by the firm – to make a payment, then the firm can accept this without having completed an income and expenditure assessment. In these cases, firms must contact the customer after 60 days to confirm whether the arrangement is still sustainable.
In addition, firms are reminded about the importance of both recognising when a customer is vulnerable, and responding appropriately, working with them to offer support and ensure their needs are met. The FCA are very clear, throughout the guidance, that fair treatment of customers in financial difficulties and who are vulnerable is expected.
Firms that offer overdraft products must contact overdraft customers who have received temporary support to determine if they still need assistance. Where they do they must offer tailored support, for example reducing, waiving interest, agreeing staged reductions in overdraft limit, and supporting customers to reduce their overdraft usage by transferring debt.
The FCA says that the July Guidance was intended to deal with the initial emergency, but that firms now need to prepare to move back to providing customers with normal support after 31 October – however, the support offered needs to be appropriate to the circumstances and reflect the challenges of the coming months.
Finally, where appropriate, the customer must be referred to free and impartial debt advice bodies – but a referral should not be considered as a substitute to working with the customer to come to an appropriate arrangement. The actual referral should be as effective as possible, particularly where a customer is struggling to meet their essential living expenses, such as offering to transfer a customer’s call directly to a provider, or encouraging the use of digital tools.
And where further support is required – either at the end of a payment holiday or where the customer needs support for the first time – this information should be reflected on credit files in the usual way, which should help ensure that lenders have an accurate picture of customers’ financial circumstances, helping to reduce the risk of unaffordable lending.
Emphasis on Vulnerable Customers
The emphasis which the FCA are putting on the fair treatment of vulnerable customers and those customers who are in financial difficulties highlights the importance of training staff on both recognition and support of customers in both or either of these circumstances. Traditional training is difficult under the current circumstances, especially where some staff are working from home, or it is impractical to have large groups being trained on-site.
We offer two dedicated online training courses on the fair treatment of vulnerable customers and financial difficulties. Each online course, priced at just £15, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. Our fair treatment of vulnerable customers course takes delegates through identification of vulnerability, how to speak to vulnerable customers, how to record vulnerability in line with current data protection requirements, and how to offer appropriate support. Our financial difficulties course defines ‘financial difficulties’ so that staff are confidently able to recognise the situation, identification of financial difficulties, the regulatory requirements, and how to offer support.
For large groups, we can offer a simplified enrolment service and pricing, simply email robert.bell@rbcompliance.co.uk.
