UK FCA Lender Support for Borrowers

On May 25, UK FCA consulted on support for those in difficulty.

  • UK FCA reported lenders will pay out up to £47mn in redress to borrowers in difficulty.
  • On same date, UK FCA proposed to make permanent requirements on lenders to support borrowers in difficulty, which were put in place during the pandemic.
  • Follows UK FCA Jan. 2022 updated on project on support during Covid, see #126903.
  • Background
  • During the Covid-19 pandemic, FCA introduced Tailored Support Guidance (TSG), to clarify how firms could support customers in financial difficulty (see #90991).
  • As consumers are now affected by the rising cost of living, it is important that lenders support customers, including those in financial difficulty, thus FCA wants to provide a stronger framework for firms to better support customers facing payment difficulties.
  • Aim to do this by incorporating relevant aspects of the TSG into the FCA Handbook.
  • These changes reinforce its expectation that firms put customers’ needs first, aligning with FCA strategy, and support firms acting to deliver good outcomes for customers.
  • Strengthening Borrower Protections
  • Under the proposed rules and guidance, mortgage, consumer credit and overdraft providers must provide right support to customers struggling to make repayments.
  • May include making reduced/no payments temporarily, changing mortgage/loan term.
  • Must also ensure repayment arrangements are appropriate; signpost customers to free, impartial money guidance, debt advice; not charge arrears fees that are higher than necessary to recover firms’ reasonable costs for consumer credit customers .
  • As well as consider the overall impact of support arrangements on mortgage balances.
  • FCA previously reminded firms of standards to meet to support struggling borrowers (see #141826) and where to improve treatment of those struggling (see #152489).
  • Effectiveness
  • The consultation is open until Jul. 13, 2023; UK FCA expects new rules to come into force in H1 2024, proposes to withdraw Tailored Support Guidance at the same time.
  • Jun. 1, 2023 Cost of Living Guidance Page
  • On Jun. 1, 2023, UK FCA added information concerning redress payments to borrowers in difficulty and consultation on supporting them to cost of living guidance webpage.
  • Apr. 10, 2024 Policy Statement and Final Rules
  • On Apr. 10, 2024, UK FCA issued policy statement containing summary of feedback.
  • This content, which was previously contained in #207984, has been moved for clarity.
  • On same day UK FCA confirmed improving picture for personal finances, see #207984.
  • UK FCA received 39 responses from stakeholders, overall were largely supportive of proposal to incorporate relevant components of TSG into FCA Handbook for the future.
  • Is therefore now finalizing most of the rules and guidance, broadly as consulted upon, with some changes, including introduction of new requirements from H2 not H1 2024.
  • The changes from the UK FCA consultation proposals include clarifying that information given to customers to help them understand the implications of proposed arrangement must include how such arrangements will be reported to the credit file in factual terms.
  • For credit including overdrafts, changing guidance so that priority debts and essential living expenses include payments for mortgages, rent, council tax, food, utility bills.
  • For mortgages, making changes to MCOB 13.5 so firms will be required to send regular statements to arrears customers, regardless of whether the shortfall attracts charges.
  • For mortgages, changing proposed guidance so that firms should be transparent about the range of forbearance options they may consider, rather than will consider.
  • For credit including overdrafts, it will now include a reference to firms communicating a customer’s options as set out within CONC 7.3.13A and CONC 5D.3.11.
  • For credit, placing more emphasis on supporting customers to engage via appropriate accessible channels, amending current provision in CONC 7.3.13A to reflect this.
  • For credit, finalizing current escalating balances provision with an amendment to remove suspend from provision to provide additional clarity on UK FCA expectations.
  • For credit, not introducing the guidance proposed under CONC 7.7.6 on charges, but introducing the guidance originally proposed under CONC 7.7.6 with amendments relating to the frequency and nature of events to which charges relate.
  • For credit including overdrafts, changing the proposed guidance under CONC 7.3.5J on reviewing forbearance measures to may include reviews at appropriate intervals.
  • For credit including overdrafts, revising CONC 7.3.5E and CONC 5D.3.9 to a firm may have regard to the spending guidelines in the Standard Financial Statement.
  • For credit, amending proposed guidance at CONC 7.3.7A that firms should make available to customer a record of income and expenditure assessment the firm has made to enable them to share the record with other lenders and debt advice providers.
  • For overdrafts, UK FCA is not progressing its proposed guidance at CONC 5D.3.3 on publication of eligibility criteria and interest rates for refinance loans on websites.
  • Changes to FCA HB are made by Consumer Credit and Mortgages (Tailored Support) Instrument 2024 (FCA 2024/7), which amends Glossary definition of priority debt.
  • Amends GEN 2.2.35A re guidance applying while firm has temporary permission.
  • MCOB 1.2.21, MCOB 1.6.4, MCOB 7.5.8, MCOB 7.7.2, MCOB 12.4.3, adds MCOB 13.1.2A, amends MCOB 13.3.1, MCOB 13.3.1A, MCOB 13.3.1C, MCOB 13.3.1D, MCOB 13.3.2A, MCOB 13.3.4A, MCOB 13.3.4C, MCOB 13.3.4D, MCOB 13.3.9. MCOB 13.5.1.
  • MCOB 13.5.2, MCOB 13.8, MCOB 14.1.3, MCOB 14.1.7, MCOB 15.3.2, MCOB 15.4.4, MCOB Sch 1.3, CONC 1.1.4, CONC 5.2A.22, CONC 5.5A.23, CONC 5D.1.1, adds CONC 5D.1.1A, amends CONC 5D.1.3, CONC 5D.2.1, CONC 5D.3.2, CONC 5D.3.3.
  • Adds CONC 5D.3.4, CONC 5D.3.5, CONC 5D.3.6, CONC 5D.3.7, CONC 5D.3.8, CONC 5D.3.9, CONC 5D.3.10, CONC 5D.3.11, updates CONC 6.7.3B, CONC 6.7.36, CONC 6.7.40, adds CONC 7.1.1A, updates CONC 7.2.1, CONC 7.2.2, adds CONC 7.2.2A.
  • Adds CONC 7.2.4, CONC 7.2.5, amends CONC 7.3.2, deletes CONC 7.3.2A, amends CONC 7.3.3, CONC 7.3.4, adds CONC 7.3.4A, CONC 7.3.4B, amends CONC 7.3.5.
  • Adds CONC 7.3.5-A, CONC 7.3.5A, CONC 7.3.5B, CONC 7.3.5C, CONC 7.3.5D, CONC 7.3.5E, CONC 7.3.5F, CONC 7.3.5G, CONC 7.3.5H, CONC 7.3.5I, CONC 7.3.5J .
  • Updates CONC 7.3.7A, CONC 7.3.8, CONC 7.3.10A, adds CONC 7.3.13A, updates CONC 7.3.17, adds CONC 7.3.17A, updates CONC 7.3.18, adds CONC 7.3.20, CONC 7.3.21, CONC 7.3.22, updates CONC 7.6.2A, CONC 7.6.2B, CONC 7.6.5, adds CONC 7.7.6, updates CONC 7.10.4, updates CONC App 1.2.5.
  • The rules come into force on Nov. 4, 2024, and TSG will be withdrawn at same time.
  • Also on Apr. 10, FCA issued updated guidance for mortgage lenders, see #211811.
  • And regulator confirmed an improving picture for personal finances, see #207984.
  • Apr. 26, 2024 FCA Handbook Notice 118
  • On Apr. 26, 2024, UK FCA issued Handbook Notice 118, reiterating above changes.
  • This content, which was previously contained in #207984, has been moved for clarity.

Regulators UK FCA
Entity Types Bank; BS; CNSM; Corp; CRB; IB; MG Orig; MSB; Servicer; SIFI
Reference HB118, 4/26/2024; PS24/2, 4/10/2024; Gd 6/1/2023; CP CP23/13, PR 5/25/2023; COVID-19; Citation: FCA HB; FCA 2024/7; Glossary; GEN 2.2.35A; *MCOB* 1.2.21, 1.6.4, 7.5.8, 7.7.2, 12.4.3, 13.1.2A, 13.3.1, 13.3.1A, 13.3.1C, 13.3.1D, 13.3.2A, 13.3.4A, 13.3.4C, 13.3.4D, 13.3.9, 13.5, 13.5.1, 13.5.2, 13.8, 14.1.3, 14.1.7, 15.3.2, 15.4.4, Sch 1.3; *CONC* 1.1.4, 5.2A.22, 5.5A.23, 5D.1.1, 5D.1.1A, 5D.1.3, 5D.2.1, 5D.3.2, 5D.3.3, 5D.3.4, 5D.3.5, 5D.3.6, 5D.3.7, 5D.3.8, 5D.3.9, 5D.3.10, 5D.3.11, 6.7.3B, 6.7.36, 6.7.40, 7.1.1A, 7.2.1, 7.2.2, 7.2.2A, 7.2.4, 7.2.5, 7.3.2, 7.3.2A, 7.3.3, 7.3.4, 7.3.4A, 7.3.4B, 7.3.5, 7.3.5-A, 7.3.5A, 7.3.5B, 7.3.5C, 7.3.5D, 7.3.5E, 7.3.5F, 7.3.5G, 7.3.5H, 7.3.5I, 7.3.5J, 7.3.7A, 7.3.8, 7.3.10A, 7.3.13A, 7.3.17, 7.3.17A, 7.3.18, 7.3.20, 7.3.21, 7.3.22, 7.6.2A, 7.6.2B, 7.6.5, 7.7.6, 7.10.4, App 1.2.5;
Functions BCS; Client Money; Compliance; Financial; HR; Legal; Operations; Product Design; Reporting; Risk; Sales Practices; Suitability; Training; Treasury
Countries United Kingdom
Category
State
Products Banking; Cards; Loan; Mortgage; Overdrafts; Payments
Regions EMEA
Rule Type Final
Rule Date 5/25/2023
Effective Date 11/4/2024
Rule Id 173875
Linked to Rule :126903
Reg. Last Update 4/10/2024
Report Section UK

Last substantive update on 06/06/2023