Cost of living ‘Red Flags’ / New SFS figures / BS18477 / Vulnerability Toolkit / Events / Firm news

From the desk of Kevin Still


The FCA continues to be in the news around their own contract & pay reform. We have previously reported on the potential talent drain. The Unite union which represents staff at the regulator announced on Tuesday 1 February that FCA Unite members had voted by 87% in support of industrial action against proposed cuts to pay and conditions. This doesn’t look a great outcome for regulated firms if this actually proceeds in a very busy 2022 from a regulatory perspective. The next step will be to hold a formal statutory ballot if Nikhil Rathi refuses to come to the negotiating table. Unite has approached the mediation service ACAS in an attempt to resolve the dispute.

I would like to congratulate Darren Bruce on his promotion. He is leaving Retail Lending Supervision and starting a new position as Manager in the FCA Authorisations Division. For those yet to engage with the Authorisation team, he may be a useful contact. I have found him very approachable since consumer credit moved under the FCA regime.

Richard Lloyd OBE will act as interim chair of the FCA from 1 June 2022.


A new emerging ESG challenge for consumers seems to be the need to create a new motoring tax to plug the revenue gap as drivers switch to electric cars to avoid a £35 billion ‘black hole’. Apparently, HM Treasury has said that tax revenues would keep pace with changes prompted by electric vehicle take-up. Motoring groups believe many drivers do now support the principle of paying more tax the more you drive. I haven’t been canvassed on this to my knowledge and I thought that this had already happened based on current fuel prices I am paying. It is very hard to be very objective around political claims when the unintended consequences never appear to have been thought through very carefully. I am hazarding a guess that my deeper review of the ‘levelling up’ White Paper will come to a similar conclusion when we get to how it will be funded and how devolved government won’t end up a bit like the Magna Carta.  


Cost of living – ‘red alerts’

Vanessa Northam, StepChange and chair of the Credit-Connect Think Tank, had an interesting time on Thursday contending with breaking news as well as keeping the speakers to time (not guilty). We had the energy cap news, followed by the Chancellor reaction and the Bank of England interest rate rise. I am hoping to produce a Blog as a follow-up from the event.

As reflected in recent DEMSA correspondence to John Glen MP, Money and Pensions Service and HM Treasury, the ‘red alerts’ are now becoming more visible from debt charities as they all respond to the announcements on 3/2/2022 around energy price increases and interest rate rises. For those in the consumer credit sector, the announcements shouldn’t be a surprise as we have been building up to this from the end of forbearance at the start of Q4 2021. To citizens that aren’t tracking this so closely, this will be a shock.

Money Advice Trust and StepChange have added their voices to raise awareness of the need for action. Energy debt is now the most common priority debt (e.g. council tax, energy, rent, mortgage) affecting callers to National Debtline with 31% in energy arrears so far this year. This is up from 24% of callers in 2021.

StepChange’s early warning is that “cost of living pressures” entered the top 5 reasons for debt among people turning to StepChange for help in November 2021 and remained there in December with 8% of new clients citing it. Around 1 in 4 new StepChange clients are in arrears on electricity and/or gas at time of advice. The quantum of the energy cost increase on monthly budgets means that sacrifices will need to be made by many and these decisions often require objective support so that the right choices are made.




Unite also commented on the cost-of-living increases.


In January 2022 more than 270,000 people sought 121 advice from Citizens Advice, topping a previous high of 265,000 who sought the charity’s help in November 2021. Demand for support is now higher than at any point since the pandemic began.

Large debt solution providers like PayPlan have issued end of 2021 reports on debt advice demand rising above 2019 levels, with significant growth in creditor referrals.

Interest rate rise

The Bank of England interest rate increase from 0.25% to 0.5% to soften inflation pressure will not only impact monthly mortgage costs, but will probably impact the cost of unsecured credit if passed on by lenders (which is normally the case). Many credit card customers assessed as being in ‘persistent debt’ (i.e. used to pay more in interest than off the debt balance every month) have been contending with ‘booster’ payments that further reduce disposable income.

Greater focus by the FCA on affordability assessments and the emerging Consumer Duty rules may make it increasingly difficult for consumers with evidence of ‘problem or persistent debt’ to switch providers at attractive rates.

DEMSA has been actively encouraging creditors and consumers to use some of the affordability assessment tools available to plan ahead and look at different household scenarios when known cost increases hit. Many consumers will now be aware of what their annual salary/wage increases are and to what extend this offsets cost of living increases. Monitoring council tax and water rate tariffs from FY 2022/23 will be important, as this will vary by postcode. Some of the input from Kevin Stewart of Mid-Sussex District Council working alongside TellJo in my session at the Credit-Connect event highlighted the discrepancies between good practice and widespread poor practices. I have previously reported on the low adoption rates of the Standard Financial Statement (SFS) by the poorer practitioners. Kevin had to cut short his session to go and meet one of his directors around the impact of the Chancellor announcements. He has posted on LinkedIn and Dominic Maxwell from TellJO picked up on this.

Quote from Kevin: “To residents living in Mid Sussex DC’s area who live in a Council Tax Banded A to D property (e.g. are liable) we are still waiting for the guidance on the £150 energy help payment announced this last week by the Chancellor. As soon as we know more about it we will I promise share this information. Please bear with us and please feel free to share this message with other residents living in our area.”

See also  DEMSA update: IVA insight / CP21-34 / Breathing Space / Cyber-resilience / Credit Summit


Rising gas and electricity costs are the main factors pushing up prices across the economy. Inflation, as measured by CPI, is expected to peak at 7.25% in April 2022 and average close to 6% through 2022. Andrew Bailey has come in for considerable criticism for his comments on keeping pay increases at sensible levels where they don’t keep track with inflation. Underlying earnings growth is estimated to remain at above pre-pandemic rates, and is expected to strengthen over the coming year, to around 4.75%, reflecting temporary upward pressure on wage settlements from higher price inflation. The attached report reflects that growth in private-sector regular Average Weekly Earnings (AWE) had slowed to 4.1% in the 3 months to November 2021.

It is worth noting that that the Monetary Policy Committee (MPC) were divided on the scale of the interest rate increase, which may be a further warning. At the meeting ending on 2 February 2022, the MPC voted by a majority of 5-4 to increase Bank Rate by 0.25% to 0.5%. Those members in the minority preferred to increase Bank Rate by 0.5 percentage points, to 0.75%.


Energy cap increase announced – taking effect April 2022

Regulator Ofgem announced that the energy price cap will rise by £693 in England, Wales and Scotland from April 2022.

That will cause bills for the average customer to rise to £1,971. There’s a different rate for prepayment customers. This will rise by £708 to £2,107.

It is estimated that this will impact 22m consumers. DEMSA will monitor the government response.

DWP – ‘big brother’ story

As part of my search for local news, I spotted this story about government plans regarding those claiming benefits in the UK and that the Department for Work and Pensions (DWP) maybe looking into personal lives without consent. This includes the millions of people throughout the country who are claiming benefits such as Universal Credit, Housing Benefit, State Pension and Employment and Support Allowance.

DWP is due a £510m funding injection to crack down on Universal Credit fraudsters lying about their benefit claims. Funds were released after figures show the DWP prevented at least £1.9 billion of fraud during the first year of the pandemic.

Checking the validity of benefit income is often a challenge for debt advisers where it is apparent that there are other sources of income at an individual or household level. Increased use of open banking and other evidence gathering is likely to mean that some tough questions may need to be asked whilst onboarding customers or undertaking annual reviews. Over payments also need to be factored into debt solutions and DWP has historically been difficult to deal with where they can directly recover repayments at a level that is not affordable.

Benefit claimants need to be knowledgeable of their privacy rights, but also aware of the need to engage and update where circumstances have changed.


New SFS guidelines published by MaPS – taking effect on 4/4/2022

A fairly timely announcement on the same day that the new energy caps from April 2022 were announced along with interest rate rises and some further support schemes from the Chancellor. These are just a few of the changes taking place at the start of the new tax year and debt advice providers are likely to have to consider bringing forward annual reviews of some debt solutions (e.g. DMP, IVA, PTD, DAS/DPP). There is a risk of reduced disposable income for many households.

Daniel Kelly of Money and Pensions Service has just published the latest Standard Financial Statement (SFS) Spending Guidelines for 2022 for those registered.

They will take effect on 4 April 2022. As always, these are guidelines and effective digital and human processes need to be in place to capture and explain high or low (where unusually low) figures. DEMSA has also highlighted the potential impact of hybrid working and home studying, where some costs may be higher (e.g. energy, comms, groceries) and others lower (e.g. travel, insurance).

There will also be an increase in the Savings allowance cap from £20 to £25. This is to account for inflation so that the savings allowance is maintained in real terms.


Government unveils levelling up plan that will transform UK

On 2 February 2022 we had the levelling up announcement, which largely got lost amongst the ongoing political discussions around conduct at Number 10 and the impending cost of living announcements. Amongst the sideshows, Michael Gove, ‘levelling up’ minister, has finally unveiled the government’s flagship Levelling Up White Paper, setting out a plan to transform the UK.

DEMSA will review and assess the impact on local community services and how this impacts debt advice and debt solution provision in the short and medium term.


Interactive version of HM Debt Management Vulnerability Toolkit

My thanks to Phoebe Pritchett at Cabinet Office for flagging this. Whilst this is not new (published in original form in August 2021 during the Crown Commercial Service DRS tenders), it needs to remain front of mind. I am hoping that this will reinforce the role of the SFS as a core plank. The call for evidence on council tax collection will help maintain this focus.

The document format seems more usable and makes reference to a number of the drills (e.g. BRUCE, BLAKE) that training providers like VCX ltd have embedded in their toolkit for public and private sector creditors, debt collectors and debt advisers. It is a fairly large document, so I haven’t attached it. We have a number of vulnerability trainers on the circulation so I am hoping that this document is a useful reference point.

I am hoping that we can discuss at future events how some of the best practices can be embedded in platforms used by central and local government agencies. It is encouraging that the likes of Vulnerability Registration Service are now seeing more and more engagement with technical platforms servicing the public and private sector, including local authorities.

I was interested in what providers like TellJO had to say at the Credit-Connect session on affordability and vulnerability. We continue to highlight good case studies of public/private sector collaborations.

See also  DEMSA update: MaPS report / Cost-of-living / Digital Engagement / FOS news / PSR Annual Plan / Events


BS 18477

On a related note, I am speaking to BSI next week around accreditation for BS 18477 (consumer vulnerability) that has been in the news in recent weeks with Equifax/TDX Group/Indesser announcing that they have been re-accredited. For TDX Group, this aligns with their ‘V’ (vulnerability) Service panel. This is relevant with the recent Debt Resolution Service framework announcements that I circulated last week. I am keen to determine whether the current accreditation process references the latest vulnerability guidance from the FCA (Feb-21) and the HM Debt Management Vulnerability Toolkit. I have a call with TDX Group on Tuesday 8 February 2022 to gain more insight into the process. There isn’t a lot of public domain information and I was trying to establish whether this likely to become a common standard like ISO27001 and Cyber Essentials Plus in the cyber-security/resilience space for firms in our ecosystems.

I welcome any feedback on firms experience with BS18477.


Introducing friction and deliberation into higher-risk decision making

I like to look for synergies and parallels that may be relevant in our sectors. This FCA release around the growth in high-risk investments by immature investors draws some interesting parallels with the recent BNPL consultation and how the right balance is struck in digital journeys involving an informed financial decision by a consumer.

This goes beyond basic disclosure. Over 1m UK adults (6% of UK investors) increased their holdings in high-risk products, or purchased new high-risk products during the first 7 months of the pandemic – a time of increased consumer vulnerability. Alarmingly, 45% of new investors were unclear that they could lose money.

The researchers looked at ‘decision points’ in consumer journeys and where to ‘interrupt’ automatic behaviours. This then became the ‘disclosure’ point for critical information to aid decision making without creating ‘white noise’. The intent is to trigger ‘deliberation’ through targeted friction points. This was especially true around ‘self-certification’. Having a memory of previous customer behaviour will certainly help future transactions and minimise user frustrations around repetition of process.

Much of this thinking looks applicable to BNPL digital journeys, especially on first lend or where the level of transactions ‘in the pipeline’ may raise serious affordability or purchase intent issues, which become much more applicable under the FCA Consumer Duty. Behavioural modelling and AI/Ml would seem very applicable where higher transaction volumes are expected than in the investment world. Many existing providers should be looking at what their data analytics are highlighting in terms of avoidable ‘red flags’ by some customer profiles and/or transaction types.

DEMSA has previously published a Blog around Financial Education and this FCA release seems to promote those aims at the right intervention points, which in BNPL world would include the requisite ‘deliberation warning’ if a credit agreement isn’t repaid to term or a consumer is likely to become over-committed.



Open Banking Excellence

My thanks to Faith Reynolds for bringing this open banking story to my attention which is now gathering some traction on Open Banking. This is looking at global open banking trends in 2022. I have recently had a number of very productive demonstrations of open banking solutions already deployed. These continue to evolve.  


MorganAsh / VCX webinar recording from 3/2/2022

This is a recording of the vulnerability webinar entitled ‘Meeting FCA guidance on vulnerable customers’ from 3/2/2022.


Skills Minister Alex Burghart MP to open CSA Skills Summit during National Apprenticeship Week 2022 – 10/2/2022

It was good to join Chris Leslie of the CSA at the Credit-Connect event. We have focused on capability development and apprenticeships have an important role to play. DEMSA has been keen to support the work that the CSA has been doing in support of the Trailblazer Debt Adviser Apprenticeship, amongst others.

The Summit aims to champion people development in financial services, as well as in government and the wider public sector, and will provide an opportunity for organisations to understand how they can cost-effectively recruit, retain, and upskill people in business-critical areas of credit, collections, compliance, counter fraud and debt advice.


Collaboration Network – online event on 15/2/2022

Fresh off the back of the Credit-Connect Think Tank on customer engagement, David Murphy is guest chair of the Collaboration Network – The Extra Support Club: Vulnerability Discussion on Signposting Customers. Key areas of discussion will include:

  • What are the tools to support all frontline advisers?
  • How do we prioritise customer needs (multiple potential referrals vs low mental capacity)?
  • Can digital replicate the same outcome?
  • How are we closing the loop from referrals?
  • How are we supporting third parties?

David is supported by Carolyn Delehanty and Will Archer. He has posed the question: “How do we consistently signpost customers in vulnerable situations to the right support agencies at the right time, and how are we closing the loop?”

Many of these topics will be familiar from a number of recent forums. The adoption of best practices at scale is a critical need to maintain momentum on adoption and integration. I may sound like a broken record on the need to get many of the providers joined up so that integration projects are not breaking new ground and there are resilient primary relationship partnerships to support end-to-end delivery to the point of looking at benefit realisation and the next stages of optimisation/continuous improvement. Whilst I am physically not getting leaner, my mindset is doing its best in contemplation of getting back to the gym when my bandages come off.   


VRS event – 24/2/2022

The event is intended to explain how VRS is sharing information to enable the use of a unique dataset, providing insight to organisations from multiple sectors, and how this data is already being effectively used to support vulnerable people. This includes activity in the water sector (Welsh Water) and systems integration with local authorities through platforms like Ascendant Solutions. New datasets from the likes of the Illegal Money Lending Team need to considered in terms of how this data is interpreted when a ‘hit’ is made through API links with VRS.  

See also  APR 2021 - OpenBanking - LENDING TECHNOLOGY THINK TANK


Industry news

CCS upcoming bids

RM6269 is due for award on 8/2/2022 – Restructuring & Insolvency Services. This agreement will offer access to a range of suppliers providing specialist Restructuring & Insolvency services including:

  • business reviews
  • insolvency contingency planning
  • cash flow reviews
  • distressed debt structuring



Capgemini has also published an article on key trends in 2022 in the public sector. They have reflected the unique demands of the pandemic and climate crises are transforming the public sector. This is encouraging new alliances with business and citizens, speeding the transition to digital and galvanizing industry and society to make best use of the largest stimulus packages in history.

  • Cloud adoption
  • Realising the power of data sharing
  • A digital social contract is needed to build trust in technology
  • Tackling cyber-crime
  • Public authorities to become innovation hubs

DEMSA has produced a horizon scan on Cyber-security/resilience based on the government strategy from December 2021. This will undoubtedly involve major support from large systems integrators and infrastructure providers, as well as inviting more small & medium sized firms to engage with government agencies through evolving procurement processes and frameworks like CCS has promoted.

The pathway to better data sharing requires some real pioneers to overcome the usual blockers that many on this circulation routinely experience even with anonymised and synthetic data to help build some of the AI/Ml and behavioural models discussed in many of the articles we share.   


This links with an interesting post that I reviewed at the start of last week around the Top-10 Operational Risks for 2022. Staff make up the top 2, which the FCA may need to take heed of. Cyber-crime is third, followed by fraud. Whilst there are no surprises, there are a number of headlines that need to be prominent in updated Risk Management Frameworks and risk assessments. The shortage of cyber skills is becoming more and more prominent.

It has been interesting talking with those that have gone through ISO27001 accreditation and Cyber Essentials Plus that these assessments need to constant, much like we discussed perpetual KYC and AML checks for firm holding high risk permissions.


Aveni in the news

Joseph Twigg, CEO of Aveni, along with 2 other founders, Lexi Birch and Jamie Hunter, have been in the news discussing their plans for 2022. They are likely to be consistent with many of the FinTechs on the circulation where there is a compelling need to operationalise some of the innovative tools into mainstream customer operations during a transitional year before the FCA Consumer Duty is implemented in April 2023. Aveni’s messaging on LinkedIn has been around improving Quality Assurance processes and the role of Natural Language Processing (NLP). Quality Management Frameworks are definitely on the agenda this year and DEMSA has previously provided updates on the work that MaPS is doing in this space and the original focus by Wyman over 4-years ago.

The team spent around 9 months working with Nationwide to build out its vulnerable customer tool, which it has now launched with one of its earliest adopters, the Key Group. The article also reflects the work they have done with Scottish Power in a sector that has some real challenges with both the cost of services and dealing with impacted customers.

Along with providers like MorganAsh and VCX, also targeting advice providers (e.g. IFAs), their tool extracts information from client calls and puts it through Aveni’s system, which automatically checks for signs of vulnerability. Advisers can access the results of these checks via Aveni’s dashboard. The tool is designed to pre-populate things like suitability reports or CRM systems.

“We reckon we can make the advice process 50%-70% more efficient, which is attractive to big companies for growth ambitions,” Twigg explained in the article.

A common theme from recent events that DEMSA has supported is what do you do when alerted to evidence of vulnerability and how do you embed this in mainstream processes not just in arrears management, but wider customer service (e.g. CRM, CCaaS) platforms.   



Digital DRA partnership with PayPlan

Another digital collaboration that was announced this week.

PayPlan’s comments on the partnership:

“Over the last few years we’ve seen a real increase in the demand for digital debt advice. We understand that it can be really daunting to pick up the phone and have a conversation about your finances, so being able to access advice digitally is really important to our customers. We look forward to partnering with The Digital DRA to support their customers who find themselves struggling financially, by offering a seamless journey into advice, via a channel they are comfortable with.”



Percayso raise £3.4m

We have previously reported the important integration between VRS and the Percayso platform and the extended reach to the insurance sector which has its own challenges in 2022. There has been a lot of coverage of this collaboration in the insurance press.

Launched in 2019, Percayso helps insurers prevent fraud, compete on price comparison sites and reduce risk levels. Congratulations to the team and Simon James, who worked with me many moons ago at Equifax. We had some very eventful trips to the US as part of our R & D mission to innovate and extend our range of ‘navigator’ decision engine products. Simon seems to have weathered fairly well from the photo posted by investors Praetura Ventures.      


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