FCA publishes Financial Lives Survey 2024

Last week the FCA published the findings of its Financial Lives Survey on the cost of living, conducted this January. The FCA uses the survey to explore the finances of UK consumers and how they would assess their own situation. The survey was carried out between December 2023 and January 2024, with under 3,500 respondents.

The regulator reported that 7.4m people were struggling to pay bills and credit repayments in January 2024, however this is down from 10.9m in January 2023. This is a positive step in the right direction, but this is still higher than the 5.8m recorded in February 2020, before the cost-of-living squeeze and the Covid pandemic began.

Though it appears that the cost-of-living crisis has not been as bad as some expected, over 5m people still said they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous 6 months from January 2024. To counter act this most people (77% or 40.5m) spent less or worked more to make ends meet.

Despite high interest rates, 50% of renters (over twice the proportion (24%) of mortgage holders) reported they were not coping financially. Renting continues to be of high cost and a struggle to many.

A key objective of the CCTA is to protect access to credit. The survey didn’t really explore the credit options people had available to them but it was interesting to read about the reasons people cut back on essentials. One percent of people reported prioritising paying back a loan from an unlicensed money lender or another informal lender. A figure we know is often under reported.

Also, another four per cent reported they were prioritising paying back family or friends. We also know that the line between this form of borrowing can be blurred with illegal lending. The Illegal Money Lending Team has reported in recent times that around 60% of clients believed the loan shark to be a friend at the point of borrowing.

In the 12 months to January 2024, 2.7m adults also sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty. Nearly half (47%) of those that sought help said they were in a better position as a result.

The FCA has used the survey as an opportunity to remind firms of their commitments to their consumers. The regulator has announced that its tailored support guidance, introduced in the Covid-19 pandemic, is to be transferred over to the FCA handbook. The new rules include:

• expanding protections beyond customers who have already missed payments, to those at risk of payment difficulty
• widening the forbearance options firms should consider
• enhancing expectations around customer engagement and providing information including on money guidance and debt advice
• requiring credit firms to consider customers’ individual circumstances when providing forbearance

As we have said previously, dealing with customers in financial difficulty or those with vulnerable characteristics remains a central aim of the FCA. Firms should always be referring to the Consumer Duty and questioning whether they are doing the right thing.

In the coming months we will be working with the debt advice community and firms to help customers improve their financial situation.

The new rules will come into force on the 4^th November.