Updates to CONC

The Consumer Credit Sourcebook (CONC) is being updated to further strengthen protections for consumers facing financial difficulty. The changes will come into force on 4th November 2024, so firms have just over a month to finalise preparations.

This latest update takes elements from the Tailored Support Guidance – used during 2020 to support those in difficulty due to pandemic pressures – and amends those provisions with the aim of improving the early identification and support of customers most at risk of financial difficulties. 

The FCA has long been concerned about the effective use of forbearance options. The industry has tended to stick to the most commonly used forms – payment holidays, waiving late fees etc - in part due to standardised policies and because there have been concerns about the ‘risk’ involved in using some of the less common types. 

---

RELATED ARTICLES:

Consumer Duty – What Next?

FCA Put Fair Value into Action

RELATED RESOURCES:

Financial Difficulties (2024)

Fair Treatment of Vulnerable Customers 2024

---

One of the major risks is the possibility of confusion, particularly when refinancing. This option involves multiple steps and both staff and customer need to understand the customer’s short-term and foreseeable financial situation, as well as how any changes to the terms and conditions will impact the customer. Both staff and customers need to fully understand the consequences and whether changes are ultimately in the customer’s best interest. Consequences could include increasing the total cost of the loan over the longer term. So lower monthly payments in the short term but an increase in the total debt due to additional interest over that longer period of repayment.

The FCA has made it clear that it now expects firms to use the full range of forbearance options, tailoring support to each customer’s individual circumstances.

Where refinancing is the best fit for the customer, firms shouldn’t be wary of using it. As long as it’s right for the customer, and the long term implications are clearly communicated to them, there are benefits for both the customer and the firm. Lower payments and extended terms can offer stability, which helps to prevent default.

For firms that have not used refinancing as an option in the past, it is possible to reduce some of the perceived burden of the option through:

- Simplifying communication: provide clear, concise and tailored information for both customer and staff. Include simple information in scripts or within process documents to explain to staff and customers about refinancing options in a straightforward way. Include examples of how it will affect their debt, and total repayment amounts.

- Revise process: Allow time for customers to assess whether this is the right option for them. Provide clear information on what refinancing will mean for them, including a clear explanation of the new terms, the impact on total repayment, the effect on their credit score, fees and costs involved if there are any, and the impact on existing debts.

- Training: Staff should be knowledgeable on the impact of refinancing on a customer’s financial situation. Staff should be trained on the requirements involved, including assessing the customer’s full situation, using clear communication, and explaining the implications clearly.

- Regular reviews: Use regular reviews with the option to adjust the terms based on changes in the customer’s situation. This approach helps to ensure that the new arrangement doesn’t become unsustainable.

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.