FCA borrowers in Financial Difficulty
Friday 19 April 2024
On the 10th of April the FCA published their Policy Statement and final rules on Strengthening Protections for Borrowers in Financial Difficulty: Consumer Credit and Mortgages. The FCA’s final rules incorporate aspects of the Tailored Support Guidance (TSG) into the Handbook and will apply to the Consumer Credit (CONC) and Mortgages (MCOBS) sourcebooks. Although credit union lending is exempt from CONC we wanted to highlight the changes that are being implemented from November 2024.
As of January 2024, 7.4 million people are still struggling to pay their bills and credit repayments. This number is lower than the pandemic peak of 8.8 million in March 2021, but still higher than the pre-pandemic level of 5.8 million in February 2020.
FCA confirms stronger protections for borrowers; the regulator is reminding those in financial difficulty to:
- Contact your lender for support if you are worried about keeping up with payments. Speak with your credit union about the options that you can take to not affect your credit score.
- Fully utilise MoneyHelper for tips on living on a reduced income, as this website provides free expert debt advice.
Over 2.7 million adults sought financial help in the 12 months leading up to January 2024. 47% of them reported being in a better position after seeking help. However, 2 in 5 adults who fell behind on bills avoided talking to their lender. Renters, single parents, minorities, and those living in the north-east of England are more likely to face financial difficulties.
The regulator has cracked down where firms have not met its expectations, securing nearly £60 million in compensation for 270,000 customers. It should be noted that this is not specifically credit unions but all firms. FCA has also confirmed stronger protections for borrowers. Making permanent expectations on lenders to support borrowers in difficulty.
New Rules coming into place on the 4th November 2024 incorporating aspects of the tailored support guidance (TSG) into the CONC and MCOBS rulebooks:
- expanding protections beyond customers who have already missed payments, to those at risk of payment difficulty
- widening the forbearance options firms should consider
- enhancing expectations around customer engagement and providing information including on money guidance and debt advice
- requiring credit firms to consider customers’ individual circumstances when providing forbearance (which is already expected for mortgage firms)