On 25 May 2023, the FCA published Consultation Paper CP23/13: Strengthening protections of borrowers in financial difficulty: Consumer credit and mortgages, which sets out proposed changes to FCA sourcebooks to reflect the planned withdrawal of the Tailored Support Guidance (TSG).
During the coronavirus pandemic the FCA introduced the TSG to make clear how firms could support customers in financial difficulty. This temporary guidance was last updated in 2021 for consumer credit and mortgages.
The consultation sets out how the FCA is planning to incorporate aspects of the TSG into its Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebook and withdraw the TSG. The FCA also proposes targeted additional changes to support consumers in financial difficulty. The aim of these changes is to provide a stronger framework for firms to better support customers facing payment difficulties.
The FCA reports that it has worked with almost 100 lenders on how they treat borrowers in financial difficulty and has sought significant improvements from many of them. Issues identified include not adequately tailoring support to individual circumstances, failing to respond appropriately to customers with characteristics of vulnerability, and not effectively engaging with customers about money guidance and debt advice. The FCA states that so far it has secured up to £47m of redress from 17 of these firms for over 195,000 customers. It has given detailed feedback to all the firms it worked with on the areas they need to improve.
Key aspects of the FCA’s proposals in CP23/13 include:
- Broadening the scope of relevant consumer credit and mortgage chapters to make clear to firms that appropriate support should be provided to customers in or at risk of payment difficulty.
- Enhancing the FCA’s expectations around customer engagement and providing information including on money guidance and debt advice.
- Expecting firms to consider a range of forbearance options and take reasonable steps to ensure arrangements remain appropriate.
- For consumer credit, expecting firms to take into account the customer’s individual circumstances when providing forbearance (which is already expected for mortgage firms).
The FCA is also proposing targeted additional changes, separate to the TSG, to support consumers in financial difficulty. For consumer credit firms, the FCA is proposing an additional change beyond the TSG to:
- Introduce guidance to help firms determine their necessary and reasonable costs in setting fees and changes.
For mortgages, the FCA is proposing to:
- Change its guidance to allow firms more scope to capitalise payment shortfalls where appropriate.
- Improve disclosure for all customers in payment shortfall.
- Make clearer the FCA’s existing requirements to record telephone calls with customers in payment shortfall, including video conferencing.
The deadline for comments on the consultation is 13 July 2023. The FCA expects new rules to come into force in H1 2024 and proposes to withdraw the TSG at the same time.