Financial difficulty

Borrowers in financial difficulty and FCA forbearance review

The FCA has undertaken a significant amount of work as part of its review into ‘Borrowers in Financial Difficulty’.  We continue our ongoing engagement with the FCA, in order to ensure members are as sighted as possible on the regulator’s key areas of focus and overall direction of travel. We worked with members to embed the FCA’s policy to strengthen protection for borrowers in financial difficulty.

We  supported members through the cost-of-living crisis by providing meaningful data insight into cardholder spend and the development of a toolkit of materials for use by the industry, promoting the need for customers to engage early with their lenders at the first sign of potential or actual financial difficulty.We continue to engage with debt advice providers to ensure that customers are able to access the support that is necessary whilst continuing to advocate the need for broader contribution to the funding of the advice sector through proportionate contributions from other sectors that benefit from the debt advice, such as utilities and telecoms.

Debt Advice Commissioning

Following the commencement of the central three year debt advice commissioning contracts awarded by the Money and Pensions Service (MaPS) in February 2023, we have worked with the advice sector to understand the potential implications for service provision for our members and their clients. With household budgets remaining under strain due to cost-of-living challenges, including energy costs, which the advice sector indicates continue to be the primary driver of financial difficulty for around 25% of new clients , we continue to advocate for the broadening of funding of the debt advice to other creditor types that benefit from the advice (such as energy, telecoms and local authority creditors.  The only statutory route for funding is currently on the financial services sector, as raised through the FCA levy.  We are engaging MaPS to have closer involvement with the commissioning process and influence on the debt advice sector strategy to deliver collaboration and efficiency across the sector.

Insolvency reform

We continue to actively engage with regulators and legislators on personal insolvency reform, including in the devolved regions. We responded to the Insolvency Service’s ‘Future of Regulation’ consultation, confirming broad support for the creation of a single regulator that is implemented in a cost-efficient way, and for the introduction of regulation for the IVA provider firm as well as the Insolvency Practitioner. We have continued to support targeted policy initiatives to address the concerns that the referral fee business model of Debt Packagers can lead to individuals entering an Individual Voluntary Arrangement (IVA) where it is not the most appropriate debt solution, and advocate that all forms of debt advice should be delivered by FCA authorised advisers so they are able to provide holistic adcice across the complete spectrum of statutory and non-statutory debt solutions.