CONC Updates – What this means for supporting customers in financial difficulties

There is some cause for optimism in the industry as Bank of England interest rates are slowly lowered, with most being cautiously confident about much needed growth in the UK towards the back end of 2024.

However, the lowest fifth of earners continue to struggle. Prices are still rising – albeit at a slower pace – and those who were already finding it difficult to manage their finances before 2020 are facing a third year of higher prices.

Data from Hargreaves Lansdown shows that one in five who had to remortgage after 2022 were categorised as having ‘poor’ or ‘very poor’ financial resilience. For renters, it’s even worse: 54% scored ‘poor’ or ‘very poor.’

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We need to be cautious then, about being too optimistic. A general recovery trend in growth might, on the face of it, suggest there’s no need to make more changes to how we support customers in difficulty than we did before. But the experience of the lower half of earners tells a very different story, even as interest rates decrease.

In November, the Financial Conduct Authority will implement changes to CONC, which tells us we need to support customers before they get into arrears. In short, we’ll need to provide the same level of customer support, consideration of forbearance options, and ongoing monitoring at a much earlier stage than we have done previously.

The new rules also extend forbearance options, and ask us to consider solutions beyond the ones we’re now used to. The FCA have also made it clear that reducing or waiving interest shouldn’t just be considered so much as actively used when necessary.

Forbearance arrangements should be stopping customers’ debt levels from escalating. So when a sustainable repayment arrangement has been agreed, firms must reduce, waive or cancel any further interest or charges to ensure the debt does not increase during the period of the arrangement.

The changes to CONC are clear. Customers need to be supported before they get into difficulty. So, how will we know when that is?

A combined approach is needed: proactive monitoring and use of data analytics, combined with the individual identification that only front-line staff speaking to individual customers can do.

Monitoring payment behaviour for late or missed payments is a given. But the FCA is saying we need to act before the customer gets to the missed payment stage. So picking up where customers begin to change their habits, making minimum payments for example, can indicate they are having trouble managing their finances.

Analysing spending patterns – any increase in credit usage – and identifying a higher proportion of income being spent on essentials during the Income and Expenditure assessment would clearly show the customer is facing financial stress.

Whenever a customer expresses concerns about being able to make their repayments, this must be acted upon. That’s why it’s vital that frontline staff are able to pick up on indicators of financial difficulties much earlier than we have been doing.

Because this is ‘off-script,’ it’s often harder for staff to know how to deviate and spend a bit of time speaking to the customer about their situation, even if they do notice the indicator itself. Training staff to show them how it’s done and offering the opportunity to ‘test’ their skills before using them in the real world leads to better results. Once the new rules in CONC are brought in, staff will need to know that if the customer mentions concerns about not being able to meet their repayments in the future, switching to a lower paid job, upcoming medical care, all of these things will mean they need to engage with the customer to find out whether this means they could be approaching arrears or financial difficulties, and taking action if they are.

This year it is critical to ensure that frontline staff are able to identify potential indicators of financial difficulties. Our online training course introduces new staff to regulatory requirements, key legislation and process, and offers excellent refresher training with plenty of practical and interactive sessions for established staff. Our Financial Difficulties course is priced at £20, is accessible at the user’s convenience and provides a certificate upon successful completion.