INSIGHTS ¦ Strengthening Protections for Borrowers in Financial Difficulty: Consumer Credit and Mortgages

This is the orginal consultation paper from the FCA which evolved into PS24/2


The Financial Conduct Authority (FCA) has released Consultation Paper CP23/13, focusing on enhancing protections for borrowers experiencing financial difficulties across consumer credit and mortgage sectors. The document outlines proposals aimed at integrating aspects of the previously temporary Tailored Support Guidance (TSG) into the FCA’s permanent Handbook, refining consumer support mechanisms beyond the pandemic context.

Key Points

  1. Integration of TSG into the FCA Handbook: The FCA proposes to incorporate relevant aspects of the TSG into the Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebooks.
  2. Enhancement of Consumer Support: The changes aim to broaden the scope of support for customers facing or at risk of payment difficulties, ensuring early intervention and comprehensive support.
  3. Targeted Changes for Consumer Credit and Mortgages: Apart from integrating TSG, additional changes include more nuanced guidance on fee assessments and capitalisation of payment shortfalls.
  4. Stakeholder Engagement: The paper solicits feedback from a wide range of stakeholders including financial institutions, consumer groups, and industry bodies.
  5. Consumer Protection Focus: The proposals emphasize consumer protection, ensuring firms provide appropriate forbearance and support tailored to individual circumstances.
  6. Transparency and Communication Enhancements: Firms are expected to improve transparency about available forbearance options and communicate effectively with customers, especially those vulnerable or in financial distress.
  7. Guidance on Debt Advice: Enhanced requirements for firms to guide customers towards debt advice and money guidance, reflecting the positive impact of such support as documented in recent surveys.
  8. Regulatory Adjustments: The consultation discusses adjustments in regulatory requirements to better align with the evolving needs of consumers and the lending industry.
  9. Monitoring and Success Measurement: The FCA plans to monitor the effectiveness of these changes through ongoing supervision and engagement with stakeholders.
  10. Future Implementation and Timelines: Subject to consultation feedback, the FCA aims to finalize these changes and begin implementation by the first half of 2024.
  11. Focus on Vulnerable Customers: Special attention is given to the needs of vulnerable consumers to prevent potential harm.
  12. Cost-Benefit Analysis: An analysis is provided to weigh the costs against the benefits of the proposed changes, emphasizing the anticipated positive impacts on consumer well-being and market integrity.
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Key Statistics

  • Financial Vulnerability Increase: The number of UK adults with low financial resilience grew from 10.7 million in 2020 to 12.9 million in 2022.
  • Debt Advice Impact: Two-thirds of debt advice users reported that their debts became more manageable after consultation.
  • Consumer Engagement: Proposals aim to address previous findings where engagement and support for consumers in financial difficulty were inadequate.

Key Takeaways

  • The FCA’s integration of TSG into the Handbook marks a significant move towards institutionalizing pandemic-era protections.
  • Clear, tailored communication and transparency in fee structuring are pivotal to the proposed changes.
  • Enhanced protections are particularly focused on consumers at risk of or already facing payment difficulties.
  • Stakeholder feedback is crucial for refining and implementing the proposed changes effectively.
  • Monitoring and adaptation will be ongoing, ensuring that the regulations evolve in response to real-world impacts and challenges.
  • The emphasis on vulnerability and equitable treatment underlines the FCA’s commitment to inclusivity and fairness in financial services.
  • Expected outcomes include better-managed consumer debts, fewer escalations into severe payment difficulties, and overall improved financial well-being for consumers.

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