Helping Customers In Financial Difficulties

Remember, remember the 4th of November? With the updates to CONC just around the corner, we’re helping firms to make impactful changes to their current processes and training programmes to meet those new requirements in advance of the implementation on 4th November.

The importance of taking this update seriously was highlighted by the latest enforcement action by the FCA, against TSB, announced on 10th October. The bank was fined just under £11m for failing to ensure that customers who were in arrears were treated fairly.

The FCA found that, due to inadequate processes, there was a clear risk that repayment plans were not realistic. 

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A Skilled Person found that collections and recoveries policies contained requirements that increased the risk of unfair customer outcomes. A given example was the requirement to make a payment before a forbearance arrangement was offered. 

The Skilled Person also found that where a customer agreed to clear their arrears within a short period, TSB did not always investigate the customer’s situation to understand whether they were in financial difficulty, and how this might affect their overall situation. The risk here is that TSB took payments that some customers could not afford, in short setting repayment plans that were unaffordable or unsustainable.

There was also the issue that its training programme did not “fully support its staff in understanding customers’ circumstances.” The need to investigate customers’ circumstances is repeated over and over again in enforcement notices and in other publications. This is a particularly important issue now that the rules are changing in November, and the Consumer Duty lens is bound to strengthen the FCA’s expectations.

So, what is actually expected here?

Staff need to have the knowledge and skills to properly understand customers’ individual circumstances, including:

• Identifying customers who may be approaching or in financial difficulties or experiencing vulnerabilities. 

• Asking questions to understand what the circumstances are, how long they have been happening, how long they are likely to last and how they affect the customer and their ability to engage with the firm and meet their financial commitments.

• Understanding which support options are available and will best suit the customer’s needs, then working with the customer to choose an option, explaining what will happen and how it will affect the customer’s finances.

This requires a wealth of skills including effective communication, empathy, the ability to analyse and to ask open questions. They’ll also need the confidence to be able to be proactive – watching for signs and understanding how to engage with customers so that they feel comfortable speaking about their situation.

The outcome for TSB was that it was found to have failed customers who got into difficulties with their finances, and potentially made things worse for some. Now, under the Consumer Duty and with increased scrutiny on support for customers approaching and in financial difficulties, the outcome for the firm would likely be much worse.

The Final Notice highlighted that staff had difficulty in identifying vulnerable customers, in part because the training programme did not equip staff to ask the right questions about a customer’s financial situation and the customer’s ability to make payments. They also were not familiar with the range of forbearance options that should be offered.

This is even more critical as the new CONC requirements come into force on 4th November. Firms will be required to identify customers in financial difficulties at a much earlier stage.

This year it is vital 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.