KEY THEMES+ ¦ DEMSA Summary

What you need to know this week

  • UK inflation rose to 3.4% in December 2025, the first increase in five months, ahead of the Bank of England’s first interest rate meeting of 2026.
  • Senior Labour MPs have urged the Chancellor to expand credit unions to double their reach, building on the Financial Inclusion Strategy.
  • New analysis highlights growing consumer sensitivity to credit scores among low-to-middle income households, linked to BNPL use for everyday spending.
  • Concerns have been raised about the frequency of consumer credit score checking, driven by digital dashboards and financial promotions.
  • The ICO has published guidance on agentic AI and fined firms £225,000 for unlawful nuisance marketing.
  • The Government Digital Service has published a roadmap for modern digital government to 2030, including AI for public good.
  • UK Finance’s Financial Abuse Code now covers 90% of UK mortgage lending.
  • StepChange reported 11,525 full debt advice completions in December 2025, with falling energy arrears among clients.
  • Individual insolvencies in England and Wales reached 126,240 in 2025, the highest level since 2010.
  • Scottish personal insolvencies increased year-on-year in Q3 2025/26, with high take-up of fee-free bankruptcy applications.
  • The Enforcement Conduct Board published its first annual Insights Report, covering 3.7m enforcement cases in six months.
  • Multiple sector events and webinars are scheduled in early 2026 focusing on affordability, vulnerability, AI governance and enforcement standards.

Key Themes

Inflation, Credit and Economic Pressure

  • Inflation increased to 3.4% in December 2025, driven by higher tobacco prices and airfares.
  • The rise precedes interest rate decisions following a cut to 3.75% at the end of 2025.
  • Ongoing economic pressure continues to shape borrowing, affordability and arrears risk.
  • Matters for lenders and debt managers monitoring consumer resilience and repayment capacity.
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See also  KEY THEMES+ ¦ DEMSA Summary

Financial Inclusion and Access to Credit

  • MPs have called for expansion of credit unions to improve access to affordable credit.
  • The proposals build on the HM Treasury Financial Inclusion Strategy.
  • Highlights political focus on alternatives to high-cost or deferred credit.
  • Relevant for policy alignment and partnership strategies across the sector.
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Credit Scores, BNPL and Consumer Behaviour

  • Research shows LMI households prioritising credit scores, sometimes at the expense of essentials.
  • BNPL usage for everyday expenditure is linked to increased score sensitivity.
  • Frequent score checking is reinforced by apps, dashboards and marketing.
  • Raises questions around consumer harm, data timeliness and informed borrowing.
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AI, Data Protection and Consumer Privacy

  • The ICO outlined the rise of agentic AI and its role in payments and financial decision-making.
  • Enforcement action was taken against firms breaching marketing consent rules.
  • Strong data protection is positioned as essential to public trust in AI adoption.
  • Critical for firms deploying AI in customer journeys and credit decisioning.
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Digital Government and Public Sector Transformation

  • The GDS roadmap sets out transformation priorities through to 2030.
  • AI capability building and productivity gains are central objectives.
  • Estimated £45bn in savings and productivity improvements remain a key target.
  • Impacts suppliers, advisers and delivery partners across regulated services.
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Vulnerability, Abuse and Consumer Protection

  • UK Finance’s Financial Abuse Code now covers 90% of mortgage lending.
  • Focus continues on economic abuse and lender response frameworks.
  • Aligns with broader vulnerability standards and Consumer Duty expectations.
  • Relevant for policy, training and operational design.
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See also  KEY THEMES+ ¦ DEMSA Summary

Debt Advice Demand and Client Trends

  • StepChange saw seasonal declines in December volumes but year-on-year growth.
  • Digital channels dominate advice delivery.
  • Energy arrears reduced compared with December 2024.
  • Signals shifting patterns in household financial stress.
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Personal Insolvency and Debt Solutions

  • Insolvencies in England and Wales rose 7% in 2025, with DROs at record levels.
  • Scottish insolvencies rose in Q3 2025/26, with strong use of DAS and moratoria.
  • Fee-free bankruptcy applications dominated in Scotland.
  • Informs policy debate on statutory debt remedies and reform.
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Enforcement, Regulation and Vulnerability Standards

  • The ECB reported 3.7m enforcement cases with debt value of almost £2.2bn in six months.
  • Vulnerability was identified in over 177,000 cases, with support provided in fewer than half.
  • Complaints volumes remain low but upheld rates are high.
  • Government action on statutory powers and standards remains outstanding.
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Cyber and Operational Resilience

  • The CBEST thematic identified ongoing gaps in cyber hygiene across firms.
  • Key weaknesses include access management, detection and staff awareness.
  • Findings extend across supply chains and outsourced providers.
  • Relevant for compliance, assurance and technology risk management.
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Key Statistics

  • UK CPI inflation reached 3.4% in December 2025.
  • Individual insolvencies in England and Wales totalled 126,240 in 2025.
  • 89,130 breathing spaces were registered in 2025.
  • StepChange completed 11,525 full debt advice sessions in December 2025.
  • 26% of StepChange clients had electricity arrears in December 2025.
  • 3.7m enforcement cases entered TCOG between January and June 2025.
  • £527m was collected by enforcement agents in six months.
  • 177,618 enforcement cases had vulnerability identified.
  • 1,896 personal insolvencies were recorded in Scotland in Q3 2025/26.
  • 90.9% of Scottish bankruptcy applicants paid no fee.
See also  KEY THEMES+ ¦ DEMSA Newsletter

Newsletter Contents

  • Inflation and interest rate context.
  • Credit union expansion proposals.
  • Credit score sensitivity and BNPL behaviour.
  • ICO enforcement and agentic AI.
  • Digital government transformation plans.
  • Financial abuse protections in mortgages.
  • StepChange debt advice trends.
  • England and Wales insolvency outcomes.
  • Scottish debt solution statistics.
  • Enforcement sector scale and conduct.
  • Cyber resilience and CBEST findings.
  • Forthcoming sector events and webinars.

Find the full DEMSA newsletter, commentary and links here

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