June 2023: Latest Updates

Debt Packagers, Borrowers in Financial Difficulty, and the Consumer Duty

Two new sets of announcements this month.

PS23/5 – Policy Statement around new rules for Debt Packagers
CP23/13 – Consultation paper for Borrowers in Financial Difficulty

Kevin and Chris discuss these recent regulations and guidelines concerning debt packages, debt collectors, and borrowers in financial difficulty.
In this video we explore the Debt Packagers Rules, which aim to address bad practices of certain firms that refer consumers to IVA providers for significant fees.
However, there are also concerns about potential unintended consequences and the impact on the broader debt counseling community.

The conversation also touches on the upcoming Consumer Duty regulations, the need for consistency between regulators, and the potential second-order effects of these changes. They emphasize the importance of monitoring the situation and considering the implications for consumers and the supply chain.

This video discussion delves into the recent regulations surrounding debt packages, borrowers in financial difficulty, and the upcoming Consumer Duty. Kevin and Chris analyze the impact of the Debt Packagers Rules on firms that engage in questionable practices, as well as the potential unintended consequences for the wider debt counseling community. They also highlight the need for consistency between regulators and the importance of monitoring the evolving economic landscape.

Key Points

  • Debt Packagers Rules target firms involved in recruiting consumers and referring them to IVA providers for fees.
  • Concerns arise regarding the potential unintended consequences on the broader debt counseling sector.
  • The Consumer Duty regulations aim to improve customer outcomes and require higher levels of care from regulated firms.
  • The importance of measuring outcomes and providing quality customer journeys is emphasized.
  • Consistency between regulators, such as the FCA and MaPS, is crucial in selecting for-profit and not-for-profit firms.
  • Economic factors, like rising interest rates and increasing credit usage, impact consumer financial situations.
  • The interconnectedness of regulations, economic factors, and consumer behavior necessitates careful monitoring.
See also  [INSIGHTS]: Consumer Duty Firm Preparedness

Key Statistics

  • 33 firms were identified as debt packagers, while over 19,000 firms hold debt counseling permissions.
  • Citizens Advice reported four times as much demand as they can supply for debt advice.
  • Money wellness and pay plan are for-profit firms listed on the debt advice locator of the Money and Pension Service.

Key Takeaways

  1. The Debt Packagers Rules address bad practices, but there are concerns about unintended consequences on the wider debt counseling community.
  2. Consistency between regulators is needed when selecting for-profit and not-for-profit firms.
  3. The upcoming Consumer Duty regulations aim to enhance customer outcomes and require higher levels of care.
  4. Monitoring economic factors and their impact on consumer finances is crucial.
  5. Collaboration between creditors, debt counseling providers, and regulators is essential for positive customer journeys.
  6. The complexity of the debt counseling landscape necessitates thoughtful and incisive actions against bad actors.
  7. Economic indicators like rising interest rates and credit usage may contribute to increased financial difficulty.
  8. Measurement of outcomes and sustainability in debt management plans is vital for quality debt counseling.
  9. Debt relief orders need to be carefully considered to avoid unnecessary lengthy debt solutions.
  10. Consumers should prioritize their financial situation and seek knowledgeable guidance.
  11. Employers should be vigilant regarding employees’ financial struggles, as it may affect their productivity.
  12. The evolving economic landscape requires ongoing monitoring and adaptation to support consumers.

This week Kevin and Chris, discussed the recent inflation figures, which exceeded expectations at 8.7% and the rise in interest rates.

All of this puts additional pressure on consumers and will have an impact on the housing market, impacting new and different demographics in terms of affordability.

See also  [INSIGHTS] : Cost of living trends

The Financial Conduct Authority’s efforts to address borrowers in financial difficulty are to be welcomed, emphasizing the need for tailored and proactive approaches.

However, there is a lot going on into the summer as we continue to approach the consumer duty implementation deadline.

Key Summary Points

  • Inflation figures came in higher than expected at 8.7%, leading to concerns about its impact on consumers.
  • Interest rates were raised to 5% in response to the inflation data.
  • Predictions suggest interest rates may reach 6% by the end of the year.
  • Rising inflation persists despite decreases in energy prices, with high costs of food contributing to the problem.
  • The housing market faces potential challenges, including rising rents and the possibility of a market crash.
  • Mortgage holders with fixed-rate deals ending soon may be particularly impacted.
  • The Financial Conduct Authority is focusing on tailored and proactive approaches to assist borrowers in financial difficulty.
  • Uncertainty and challenges lie ahead for individuals and the market.
  • Planning ahead and considering optimal moments for mortgage deals is recommended.
  • Credit card borrowing and other financial factors may also be affected by the changing economic landscape.

Key Statistics

  • Inflation figures: 8.7%
  • Current interest rate: 5%
  • Predicted interest rate by year-end: 6%

Key Takeaways

  1. Rising inflation and interest rate hikes are adding pressure on consumers.
  2. Persistent high inflation raises concerns despite decreases in energy prices.
  3. The housing market faces potential risks, including rising rents and a possible market crash.
  4. Mortgage holders with expiring fixed-rate deals may experience financial challenges.
  5. The Financial Conduct Authority is working on tailored approaches to assist borrowers in financial difficulty.
  6. Planning and foresight are crucial in navigating the changing economic landscape.
  7. Credit card borrowing and other financial factors may be affected by rising rates.
  8. Economic uncertainty requires proactive measures from individuals and market participants.
See also  [INSIGHTS]: Too Much Information? Key Considerations for Vulnerability Data-Sharing

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