Tailored Support Guidance and CONC
With H1 2024 well under way, firms should be preparing for the FCA’s proposal to take elements of the tailored support guidance (released during the pandemic) and incorporate it into CONC and MCOB. The amendments will include new additions to better support those in financial difficulties.
The final policy statement is due to be published in H1, along with an implementation date, however the changes include policy and customer journey changes so considering amendments and updates at an early stage is recommended.
One of the key changes is the expectation that firms will preemptively take action that would normally be expected only once customers have actually missed a payment. Under the new rules if the firm is aware that someone is, or is expecting to, experience payment difficulties then there is a requirement to support those customers.
Appropriate support, then, has to be extended to ‘customers approaching arrears’ where the customer indicates that they are at risk of “not meeting one or more repayments when they fall due”. Currently, firms must monitor the customer’s repayment record and take action where there are signs of actual or possible repayment difficulties. The new rule is therefore a step further, with proactive support offered at the first statement that the customer could miss a payment in future.
This will also mean an update to process, with the rule that firms must “establish and implement clear, effective and appropriate policies and procedures for dealing with customers who are in or approaching arrears or in default” extending the current rule to have policies in place for customers whose accounts fall into arrears.
This will also apply to overdraft products, with CONC 5D amended to reflect the regulator’s expectation that patterns of repeat use should be identified as early as possible.
The new rule then explicitly states that those policies and procedures must be effective and that firm compliance with them must be reviewed regularly and holistically, taking into account actual outcomes. This will, then, require some auditing or testing, although the guidance does not prescribe how firms should ensure the policies and procedures are effective.
For mortgage products, MCOB will be updated to “make clear that firms must deal fairly with any customer who has or may have payment difficulties” which includes payment shortfalls, customer indications that they are at risk of falling into payment shortfall or where the firm otherwise becomes aware that the customer may be at risk of falling into payment shortfall, e.g. through discussions with third parties.
In all of these cases, the firm must offer appropriate support, based on a good understanding of the customer’s situation.
The changes will also affect CONC 7 and MCOB 13, updating the current forbearance examples to expand them, and giving clear examples of the consideration appropriate to individual circumstances. In practice this will include a new rule that firms must take the individual circumstances of the customer into account when considering forbearance. The examples are extended to include repayment arrangements and refinancing. Some additional guidance on the practical implications of the use of the options is also covered in the new rules and guidance within CONC 7.3.5.
New guidance will also highlight the need to provide customers approaching or in arrears or default with “timely, clear and understandable information” that is relevant to the customer and “is sufficient to enable the customer to understand their financial position in relation to their debt, including the potential impact of any forbearance on their overall balance and any implications for the customer’s credit file.” It will also suggest that firms offer to engage with customers through a range of channels, offering the ability to engage effectively with those who prefer online channels.
This year it is critical to ensure that frontline staff are able to identify potential indicators of financial difficulties. Our online training course has been updated for 2024, introducing new staff to regulatory requirements, key legislation and process, and offering excellent refresher training with plenty of practical and interactive sessions for established staff. Our Financial Difficulties course is priced at £20, is accessible at the user’s convenience and provides a certificate upon successful completion.