In the face of escalating living costs, it’s imperative for firms to extend support to customers grappling with financial challenges.

The Financial Conduct Authority (FCA) has been proactive in implementing interventions post-pandemic to strengthen frameworks for customer support, aligning with Consumer Duty. Our white paper delves into these dynamics, aiming to aid firms in navigating the complexities of customer collections effectively.

ECONOMIC LANDSCAPE

The economic terrain post-pandemic has been characterised by soaring inflation rates and escalating domestic expenses. With the Bank of England’s consecutive base rate hikes, reaching 5.25% by November 2023, the affordability of goods and services has diminished, amplifying financial strains for many borrowers. Notably, the FCA’s 2023 Financial Lives Survey revealed a significant surge in missed bill payments, underlining the pressing need for robust customer support mechanisms.

REGULATORY EXPECTATIONS

In this economic climate, the FCA emphasises fair treatment of borrowers and proactive engagement to resolve payment issues. The implementation of the Consumer Duty underscores the necessity for firms to prioritise customer outcomes throughout the arrears and forbearance journey. However, FCA research indicates that only a fraction of borrowers in financial difficulty receive adequate support, highlighting the gap between regulatory expectations and industry practices.

COLLECTIONS BEST PRACTICE & ACTIONABLE INSIGHTS

In a recent white paper on Borrowers in Financial Difficulty (BiFD) that Square 4 Partners published, we outline twelve principles encapsulating collections best practices. From proactive customer engagement to transparent fee structures, these principles serve as a roadmap for firms to ensure fair treatment and sustainable solutions for customers in financial distress. Emphasising early intervention, tailored forbearance, and effective staff training, these principles align with regulatory requirements and industry standards.

In the face of escalating living costs, it’s imperative for firms to extend support to customers grappling with financial challenges.

As firms gear up to tackle the impending “collections iceberg,” proactive measures are paramount. We advocate for strategic initiatives encompassing education, impact assessment, governance enhancement, resource allocation, and talent acquisition. By aligning collections strategies with regulatory mandates and economic forecasts, firms can navigate the challenges ahead and mitigate potential risks effectively.

CONCLUSION

In a landscape stained by economic uncertainty and regulatory scrutiny, proactive customer support is non-negotiable. By embracing regulatory expectations and implementing robust strategies, firms can safeguard customer interests and foster financial resilience in turbulent times.

To dive deeper into this topic, visit our website and download our Borrowers in Financial Difficulty white paper. Our comprehensive paper serves as a guide for firms, offering actionable insights, customer support strategies and best practices to navigate the complexities of collections effectively.