The policy statement confirms final rules and summarises feedback received from the FCA's May 2023 consultation, (CP23/13), which proposed rules to strengthen protections for mortgage, consumer credit and overdraft customers in financial difficulty. Specifically, the consultation included proposals to incorporate aspects of the FCA's coronavirus Tailored Support Guidance (TSG) into its Handbook, as well as further, targeted changes to support customers in financial difficulty in these sectors.

So what?

Through this policy the FCA is making changes to its existing forbearance rules and guidance in its Consumer Credit (CONC) and Mortgages (MCOB) sourcebooks of its Handbook – effective from November 2024. The changes require mortgage and consumer credit firms to provide enhanced support to their customers who are both in and at risk of financial difficulty. Under the new rules firms will be required to provide their customers with an enhanced range of forbearance options and engage with customers early and provide them with information on these options to enable customers to make informed choices about what action to take.  

Firms need to consider these requirements very carefully and assess what changes to their current agreements, policies and processes would be required to ensure compliance before the November 2024 deadline.

For consumer credit firms some of these changes would mean:

• Providing enhanced support to customers who are approaching arrears, meaning:

- Providing additional forbearance options to customers;
- Being transparent about the range of forbearance options they will consider and to engage with customers through    a range of channels, taking into account of the needs of vulnerable customers;
- Taking reasonable steps to ensure that any forbearance or due consideration remains appropriate; and
- Taking into account the customer’s individual circumstances when providing forbearance.

• For overdrafts this means monitoring Personal Current Account (PCA) activities to understand if a customer is facing or likely to face financial difficulties. The FCA is encouraging firms to develop data models to enable them to assess overdraft usage and PCA activity to identify those most likely to need support.
• Ensuring the effectiveness of any relevant policies and procedures put in place for customers, and that the firm’s ongoing compliance with them is reviewed at appropriate intervals.
• Providing relevant information to customers before providing forbearance to enable them to make informed choices about what action to take, including any implications on their credit file.
• Additional requirements such as requiring firms to reduce, waive or cancel any further interest or charges to ensure that the level of debt under the arrangement does not rise for the period of that arrangement, to ensure that any repayment arrangements agreed with customers remain sustainable and to inform customers of their right to voluntary termination under the Consumer Credit Act 1974 (CCA) where it is in their best interest.

For mortgage firms, most of the above requirements will also apply together with additional expectations such as:

• Taking into account the effect of the proposed support on the customer’s overall balance;
• Considering wider indebtedness when assessing appropriate support for a customer;
• Sending regular statements to all customers in arrears, not just to those where the arrears or shortfall is attracting charges;
• Agreeing to capitalise a payment shortfall in certain circumstances in line with the customer’s best interests, rather than only as a last resort when no other realistic options are available to assist the customer;
• Effectively communicating the potential benefits of accessing free and impartial money guidance and debt advice to customers, and the range of channels through which it is available; and
• Being transparent about the range of forbearance options they may consider for customers and setting them out clearly in a prominent location on firm websites.