With the UK home improvement market now worth an estimated £44 billion and a significant number of contractors ceasing to trade each year, lenders and consumers continue to be exposed to risk.

There are almost one million construction companies in the UK, ranging from large PLCs down to sole trader contractors. Every year approximately 80,000 construction businesses cease to trade, which can cause issues for consumers who resort to claiming via their lenders (credit card and point-of-sale companies) under Section 75 of the Consumer Credit Act.

Claims involving home improvement and renewable equipment can be challenging due to the complexity of this type of work. Coupled with the Financial Conduct Authority (FCA)'s continued focus on customer outcomes, lenders can often  be exposed to a multitude of issues spanning operational matters as well as financial, compliance and reputational risks.  

These days, with many home improvement contractors offering customers Insurance Backed Guarantees (IBGs), many of the products in the market are policies of last resort .They exclude cover, if work was paid for using point-of-sale finance, a credit card or loan provider.

When a claim is received from a customer, it is vital that lenders establish quickly what the claim involves and the cause, the extent of work needed and how much repairs will cost. Most lenders ask the customer to obtain their own expert report and to submit it for consideration along with an estimate for repairs. The main issue here is - can customers source a reputable expert who is also competent? Following on from that, if an estimate is required from a contractor, can customers source a suitable company from the open market and does this involve further risk? There are questions here around financial risks, treating customers fairly and achieving appropriate outcomes under Conduct Risk.   

The key to resolving claims of this nature is to act quickly by ensuring issues are independently validated by an expert appointed via lenders. By taking this step, lenders gain control of the situation and ensure that claims costs are managed from the outset. After that an accurate Scope of Works should be provided to an approved contractor who is able to  complete the work to an appropriate standard.

As the home improvement sector is continuing to expand, and with an estimated *4000 completed installations required on renewable equipment every day until 2050, perhaps it is time for financial institutions to consider a new approach to Section 75 claims. The main thing to remember is to engage an independent validation service and to utilise a contractor network that has the scale and capability to complete jobs consistently across the UK, achieving the most appropriate customer outcomes.

*Scottish Power research from Capital Economics independent consultancy.