The steep increase in living costs that are about to hit UK consumers over the winter has the potential to be the biggest rise in decades. The Financial Conduct Authority is keen to guide the economy through what is likely to be one of the most turbulent winters, certainly since the financial crisis over a decade ago, in recent times.
To help firms support customers, the Regulator has a dedicated webpage with information for firms on the cost of living centralizing everything from Dear CEO letters to speeches. This site sets out the technical aspects of customer support and forbearance.
In its most recent Strategy and Business Plan, the FCA spoke about the importance of its consumer research activities – which it hopes to expand to be able to gather the most up to date information and analysis to inform its actions. The most recent research pieces provide qualitative analysis as meat on the bones of the bare data that is usually collected.
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In June 2022 research conducted by Yonder Consulting on borrowers in financial difficulty found how – among other things – contact between lenders and borrowers affected customer outcomes and financial difficulty status. The piece aimed to take some of the findings in the FCA’s ongoing Financial Lives Survey series further, to understand the experience of financial difficulty from the borrower’s perspective. This research found that it was likely that around 15% of UK adults were borrowers in financial difficulties at the time of the study. Although the definition of ‘financial difficulties’ used in the research is broader than the FCA’s own definition, it gives a clear picture of an economy that will find the coming months difficult to weather and a significant proportion of the public whose experience of financial difficulty is due to get much more difficult.
The report highlights the importance of proactive support from lenders.
A significant finding was that over half of borrowers have suffered a negative life event through no fault of their own. A “substantial proportion” also had physical or mental health issues. These numbers are likely to increase over the coming months.
Its analysis of the customer journey found that a shocking 13% of those who had received support were contacted proactively by their lenders.
The research also found that for customers who instigated the contact, the point at which borrowers contacted their lenders tended to differ widely, but that many “were likely to have reached crisis point.” The report strongly suggests that with more action by lenders, these borrowers could be supported before they reach that crisis point.
Findings also suggest that outcomes and customer experience could be greatly improved, with only 60% positive about the experience, and with less than half feeling that their financial position had improved since contact.
One critical point is that borrowers are often confused about cause and effect with communication with many misconceptions about the potential impact of contact. There is a strong perception that lenders would not be approachable or sympathetic. The report found that one fifth of respondents did not engage with their lender because they felt it wouldn’t help, with a shocking 18% worried about losing access to their credit products.
The report highlights the importance of working proactively with borrowers to get them the support they need at critical touch-points. Getting borrowers out of financial difficulties – or better yet, supporting them before they reach that point – is one of the FCA’s key priorities. Compliance with the FCA’s expectations and rules aside, the report sets out a clear path towards helping people who will need it most over the coming months.
There is clearly a perception that lenders are unapproachable and unsympathetic. This prevents borrowers from getting in touch with lenders, so proactive communications that help to assuage fears are going to be a key factor. In particular, those in difficulty are worried that contact will make things worse or have an impact on their credit file. Initial communications – whether written or spoken – can be designed to help allay those fears and set out in clear and simple language what a discussion with the lender can do to help. Simple tweaks to current communications, such as adjusting layout and style to make it less overwhelming and more engaging, highlighting key points with ease of customer understanding in mind, providing a range of contact options, and simply explaining that contact is to help find support for them, can go a long way to switching this up.
Another key finding is that a shockingly low number of those interviewed recalled being asked about their circumstances, meaning that those lenders were unlikely to be able to offer appropriate support. Basing forbearance options on the customer’s circumstances is a FCA requirement, but it also helps get the customer back on track and making repayments more quickly. Staff training must cover how to broach this topic, check that the customer is comfortable talking about their circumstances and cover the questions that need to be asked to best assess their situation.
With the FCA’s focus on the increasing impact to the financial wellbeing of a significant proportion of UK adults, staff must be clear on the identification and support of customers in financial difficulties.
Our dedicated Financial Difficulties course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.
Priced at just £20 per user, the courses are accessible at the delegate’s convenience and provide a certificate upon successful completion, allowing firms to track and record each user’s progress.
For large groups, we can offer several corporate packages.
For more information, contact Rob Bell: robert.bell@rbcompliance.co.uk.
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