It’s been just over three months since the FCA published its report on borrowers in financial difficulty (BiFD) in November 2022. Prior to this report, in June 2022 the FCA published a Dear CEO letter on this very topic, telling more than 3,500 lenders how they expect them to support borrowers who may be struggling due to the rising cost of living, based on the interim project findings. More recently, in his blog published on 6th February, Sheldon Mills reminded how the FCA is working hard to make sure firms treat customers fairly during the cost-of-living pressures.

WHAT IS BiFD?

The BiFD project to support consumers facing payment difficulties due to coronavirus was launched by the FCA in March 2021. Its aim is to ensure firms are meeting the expectations set out in the Tailored Support Guidance (TSG) and where failings are identified, the FCA are clear – they will use their supervisory and enforcement powers to intervene.

BiFD FINDINGS

While the FCA stressed that they had observed examples of firms delivering good outcomes, their report urged all lenders to focus on improving outcomes relating to the following:

• encouraging and facilitating customer engagement
• ensuring sufficient resource, as well as ensuring staff are adequately trained and experienced
• providing appropriately tailored forbearance solutions to customers which take account of their individual circumstances
• effective governance arrangements to ensure there is adequate oversight and quality assurance of forbearance processes in place and the customer outcomes are monitored and achieved
• effective signposting to free and impartial debt advice
• ensuring that fees and charges for those in arrears or payment shortfall are applied fairly and only reflect reasonable costs incurred.

The FCA reports that this BiFD project included surveying over 400 lending firms, linked consumer research and deep dive assessments into 65 firms. The deep dive process in part involved the FCA reviewing customer files to assess firms’ delivery of forbearance for a sample of individual customers across different sectors.

At the time of writing, the BiFD project team reports that 32 of the 65 firms lenders have been asked by the FCA 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.

NEXT STEPS

It would be easy to think that just because you’re not one of the unlucky 65 firms selected from the 400 surveyed to take part in a deeper dive review that you need not act, but that would be ill-advised, particularly in light of the new Consumer Duty, which, while not yet in force, raises the bar on consumer outcomes.

The FCA have been clear in their expectations in publishing this report – firms need to consider the contents and take immediate action where necessary. This means making changes and if necessary, remedying any past failings.