Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations, at the Financial Conduct Authority, spoke at the Credit Festival on November 3, when his speech was entitled ‘Acting flexibly and treating customers fairly in the face of a pandemic.’

Mr Davidson began by commenting that consumer credit was already a priority area for the FCA, and that the pandemic has only heightened that focus. He began by mentioning the loss of jobs and reductions in income many people have experienced, and how this could affect their ability to repay their debts. The opening section of the speech also emphasised that the health emergency could have far-reaching effects on the nation’s mental health, and that there is a proven link between mental health problems and debt issues. The FCA director mentioned research from the Money and Mental Health Policy Institute which suggested that 48% of people with mental health problems were unable to weigh up the advantages and disadvantages of a loan product.

Next, he listed three key outcomes the FCA wants to see:

Customers should have the time and advice they need to get a repayment plan that is suitable for their individual circumstances. They should not be pressured into agreeing to an inappropriate debt solution. If the customer makes a proposal for a repayment plan, the provider should respond appropriately. Where appropriate, borrowers should be referred to appropriate sources of free money guidance.

Repayment plans should be “reasonable and sustainable”. To be sustainable, a repayment arrangement needs to be affordable when taking into account other priority debts and essential living costs. Where appropriate, the FCA expects firms to freeze interest, fees and charges to prevent balances escalating. Where possible, firms should contact borrowers at an early stage, before they are in severe financial difficulty.

Firms should respond to the needs of their vulnerable customers and to the challenges faced by these customers.

Mr Davidson emphasised that, in order to genuinely achieve positive outcomes, the solutions provided by firms must be tailored to the needs and circumstances of each individual customer.

Summarising the supervision activity the regulator intends to carry out in the coming months, Mr Davidson said:

“Over the coming months, we are dedicating significant resources in our supervision to look at how firms have adapted to these challenges and the outcomes consumers receive. This will include considering how well firms have planned, resourced and trained their staff to ensure that borrowers get appropriate support and forbearance, when they need it. We will be looking for firms to be flexible and employ a full range of short and long-term forbearance options to support consumers and minimise avoidable difficulties and anxiety.”

“We want to work together to support consumers and ensure they get the best possible outcomes. Where we see firms trying to do the right thing, we intend to work with you to support the resolution of these issues. Nonetheless, if we do see significant issues, we will intervene.”

Mr Davidson said that the number of people displaying signs of vulnerability had risen by 1.5 million between February and July of this year, and that 23% of UK adults (12 million people) were now considered to have low financial resilience.

He then mentioned what the FCA considers to be the four main drivers of vulnerability:

  • Health – conditions or illnesses can affect a person’s ability to carry out day-to-day tasks
  • Life events – events such as bereavement, job loss or relationship breakdown can lead to, or increase, vulnerability
  • Resilience – vulnerable individuals may have a limited ability to withstand financial shocks
  • Capability – some vulnerable individuals may have a limited knowledge of financial matters, low confidence in managing money, or low levels of literacy or digital skills

Firms were also warned to ensure that staff who deal with collections and payment deferral requests were trained in how to deal with vulnerable customers.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed by Scott Robert and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.