In light of the rising cost of living, the FCA is consulting on strengthening protections for borrowers in financial difficulty. Drawing on learnings from throughout the pandemic, the FCA is proposing that certain measures which helped customers during covid-19 should be incorporated into standard practice for the banks. This aims to provide banking institutions with more details on how they should act in relation to forbearance, and to give consumers a clearer expectation of the support they could get.
Recent Fair4All Finance research Banking response to covid-19 shows that many of the measures adopted for the pandemic significantly improved people’s circumstances at a time of financial distress, without critical impact on banks’ costs or stability. We therefore welcome plans to enhance support available from the banks to help customers in financial difficulty, regardless of the reason.
These include:
- supporting customers before, not after, they miss a payment or instalment
- offering a wide and flexible range of measures for forbearance to address each customer’s personal circumstances
- communicating with customers in a clear and simple way through their preferred channel
- keeping bank policies up-to-date in light of external factors which impact people’s financial situations, eg changes in the economic environment
Building on this, we also encourage financial institutions to go further by proactively looking to identify and reach out to people who may be struggling. Our recent research Banking response to covid-19, showed respondents would welcome being approach with offers of support rather than having to independently seek out help. Fair4All Finance’s segmentation model can assist by helping banks to identify the points at which different people may start to experience difficulties.
Overall, this an important opportunity for the FCA and the banks to coordinate a clear approach to the increased cost-of-living: encouraging customers to ask for support and empowering firms to offer a wide ranging, proactive appropriate response.
