The LSB welcomes the recent publication of the FCA’s report which assessed how lenders collect unsecured debts, and the extent to which firms are following CONC, treating customers fairly and showing appropriate forbearance. The focus was on how firms handle customers in the early stages of arrears across personal loans, credit cards, store cards and point-of-sale finance.

The report found that while there is good practice being undertaken by firms, there are clear challenges for the industry in the early identification of, and engagement with, customers who may be at risk of falling into financial difficulties. Identifying and supporting customers who are vulnerable and experiencing financial difficulty is an area where there is more work to be done.

The Standards of Lending Practice makes the distinction between customers who may be experiencing financial stress and those who are already in financial difficulty. The Standards seek to support Firms in identifying customers who have yet to miss a payment but the information available, whether provided by the customer or held by the Firm, suggests that they are struggling.

Registered Firms are encouraged to make the most of early opportunities to engage with customers who may be experiencing financial stress and pro-actively engaging with the customer to provide an appropriate solution. To ensure that the approach is embedded in the Firm, monitoring and assurance work is required to ensure that policies and processes are designed and operating effectively. Firms are also required to have appropriate policies and procedures in place to identify and support vulnerable customers where this impacts on their ability to pay.

It’s important to recognise that it isn’t just about having processes and policies in place but it is also about how these are put into practice. Customers may not always be forthcoming with information regarding their financial or personal circumstances and therefore staff training plays an important role in helping to identify and deal with a vulnerable customer who is experiencing financial difficulty.

To support Firms in achieving the Standards, the LSB has developed the Information for Practitioners which provides examples of good practice in relation to areas like vulnerability and early arrears management. Further information can be found here.