"Over seven million Britons continue to grapple with bills and repayments, down from nearly 11 million last year, but still above pre-crisis figures."
- Jordan Clark, financial planner at Quilter
The FCA has confirmed stronger protections for borrowers, making permanent the expectations on lenders to support borrowers in difficulty which were introduced during the pandemic, with additional targeted changes designed to improve outcomes for consumers.
The decision comes as its latest Financial Lives survey reveals that 7.4m people were struggling to pay bills and credit repayments in January 2024, down from 10.9m in January 2023 but still higher than the 5.8m recorded in February 2020, before the cost of living squeeze began.
What's being introduced?
The new rules will come into force on 4th November 2024. By incorporating aspects of its tailored support guidance (TSG) into its rulebook, the FCA is expanding protections beyond customers who have already missed payments, to those at risk of payment difficulty, and widening the forbearance options firms should consider.
It is also enhancing expectations around customer engagement and providing information including on money guidance and debt advice, and will require credit firms to consider customers’ individual circumstances when providing forbearance (which is already expected for mortgage firms).
The FCA is also introducing additional improvements beyond the TSG by introducing guidance to help firms determine their "necessary and reasonable costs" in setting fees and charges and allowing mortgage lenders greater scope to clear a payment shortfall by adding it to the total amount owed, meaning customers are better able to access new products and build their credit score.
The FCA has reminded financial firms they must support their customers and work with them to manage payment difficulties. The regulator has cracked down where firms haven’t met its expectations, securing nearly £60 million in compensation for 270,000 customers.
Latest research reveals borrowers still struggling
The regulator's latest research found that in the 12 months to January 2024, 2.7m adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty. Nearly half (47%) of those that sought help said they were in a better position as a result. However, 2 in 5 adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.
Renters, single adults with children, adults from a minority ethnic background and people living in the North East of England were more likely to be in financial difficulty.
Jordan Clark, financial planner at Quilter, commented: "In the face of a lingering cost-of-living crisis, the latest FCA Financial Lives survey sheds light on the resilience and challenges of millions. While we’re seeing signs of improvement, with a notable decrease in the number of people struggling to make ends meet, there’s still a significant journey ahead.
“Over seven million Britons continue to grapple with bills and repayments, down from nearly 11 million last year, but still above pre-crisis figures. More than five million have missed payments recently, though that’s an improvement from the previous year. And while 2.7 million sought help and nearly half found relief, too many are still hesitant to speak up about their financial woes.
“It’s clear that renters, single parents, minority communities, and those in the North East are disproportionately affected. And despite a three-percentage point uptick in disposable income, one in nine still have none. Women are feeling the pinch more than men, with 30% struggling financially.
“Throughout the cost-of-living crisis, the FCA has reminded lenders to work with their customers, not against them. Though we might have past the peak of interest rates, with high energy costs and stubborn inflation, we’re not out of the woods yet."
