How we can help consumers cope during the cost of living squeeze

Sheldon Mills

Executive Director, Consumers, and Competition

The FCA is working hard to make sure firms treat customers fairly during the cost of living pressures.

The days may be getting lighter, but the nights are still far too long and sleepless for many as they contemplate the heavy burden of the cost of living.

Rising bills mean many households have already cut back on non-essential spending. Many feel they have little left to cut.

Families that would once have described themselves as comfortable are bracing themselves as they face higher mortgage or rental costs.

Those worries are compounded for those who are on low wages and who were already struggling.

As people face these financial challenges, we have a vital role to play, along with the firms we regulate. We can’t change the economic circumstances, but we want to maintain a flourishing UK financial sector: One where customers are treated fairly and supported if they get into financial difficulty, get fair value, and are equipped with the information they need to make good decisions.

Our upcoming Consumer Duty comes into force in the summer. It will set a higher level of consumer protection and require firms to deliver good outcomes for customers. Firms should be stepping up now to support customers in these tough times.

Supporting customers with financial difficulty
Given the current cost of living squeeze and rising interest rates, we are concerned that people may struggle to meet their payments. Our research shows that even back in May last year, 4.2 million people had missed bills or loan payments in at least three of the previous six months.

“We want customers to be able to borrow at a rate they can afford to repay and to be supported if they get into financial difficulties.”

In line with our three-year strategy, we have set out the standards we expect firms to meet when supporting borrowers in financial difficulty and are holding them to account.

This support means people who are struggling to repay their loan, mortgage, credit card, or overdraft can get help based on their circumstances.

We expect the lenders we oversee to work constructively with those who fall behind in payments, or are at risk of doing so, so tailored support can be put in place.

We’ve seen lots of examples of good practices of this, for example, firms contacting borrowers when issues are on the horizon. But we are supervising firms closely and intervening where we are concerned that they are not acting in their customers’ interests.

We told 32 lenders to make changes to improve the way they treat their customers and by November last year, seven had agreed to pay £12 million in compensation to nearly 60,000 customers.

Opening up conversations
We know from our research that people often find it hard to talk about money and take the first step in seeking help. Lenders can play a crucial role by encouraging customers to engage earlier when facing financial difficulties and by helping people get money guidance and debt advice.

UK Finance has a range of materials lenders can use to raise awareness of the support for customers facing difficulty keeping up with payments. And MoneyHelper has useful information and tools for people struggling with the rising cost of living.

When lenders communicate with borrowers in financial difficulties, they should consider whether it would be appropriate to reduce, waive or cancel fees and charges.

Of course, financial services form just part of household bills. So, with partner regulators and debt advice charities, we want to make sure consumers can access the support they need across energy, water, and financial services markets.

We want to improve how people in debt are treated across sectors, which is why last week I convened a roundtable with senior representatives of the UK Regulators Network, to explore what else we can do to improve outcomes for consumers in debt as rising costs continue to impact their budgets.

Buy Now Pay Later concerns
More people are turning to Buy Now Pay Later. We have consistently called for a change to the law to bring BNPL products under our regulation and have been supporting the Government in the development of their draft legislation. Despite not yet having regulatory oversight of these firms, we’ve already secured changes to unfair contract terms and warned firms about misleading advertising.

We are particularly concerned about those who struggle to access affordable credit.

We have acted to improve high-cost credit for those that use it by bringing in price caps and rules that have saved borrowers hundreds of millions of pounds.

Shortly before Christmas, we hosted an event with Fair4AllFinance along with lenders, consumer groups, and charities, to discuss how together, we can help people who need affordable credit access it. And in the spring, we’ll be hosting a policy sprint on financial inclusion. This will identify practical steps that we and our partners can take to remove barriers to accessing useful financial services such as insurance and payments, as well as credit.

Helping consumers make good decisions
We know that people struggling to get a loan, or looking for a greater return on their pension or investments, will be more vulnerable to scams, which is why we’ve stepped up our ScamSmart campaign to warn them.

Firms can help by warning customers of scams. We’ve also set out how life insurers should be helping savers understand the consequences of stopping or reducing their pension contributions or cancelling protection they may need.

Leave a Reply

Your email address will not be published. Required fields are marked *