In March 2021, we launched the BiFD project to ensure firms continue to support borrowers in financial difficulty. As part of this work, we have been monitoring, gathering insight and acting where we have identified concerns at individual firms. With the pandemic ongoing we want to reiterate our expectations for the treatment of customers, as set out in the Tailored Support Guidance (TSG) for mortgages, consumer credit and overdrafts. We also detail some of our interim findings to help firms ensure they deliver the best outcomes for customers needing support.
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Read our Borrowers in Financial Difficulty (BiFD) final report.
We acted to help firms and consumers to manage the financial impact effect of the pandemic and to ensure firms supported their customers who were struggling as a result of the economic impact of coronavirus.
Guidance for firms to offer payment deferrals was quickly put in place, resulting in 1.8m mortgages and 3.4-4m consumer credit agreements having their payments deferred. Following this, in recognition of the length of the pandemic and its changing nature, the TSG was put in place, so those experiencing financial difficulties because of the pandemic can still receive support from their lenders.
We published a report in March 2021, which found firms had progressed the implementation of the TSG well, acting quickly to build their capacity to support consumers. We identified some risks firms needed to address and made our expectations in these areas clear. We noted some firms had recruited inexperienced staff and better training and quality assurance was needed.
The TSG remains in place during the exceptional circumstances created by the pandemic.
Following these initial interventions, we launched the BiFD project which is a comprehensive programme covering a range of retail lending products including first and second charge mortgages, personal loans, credit cards, high-cost products, retail finance, motor finance and overdrafts. The work includes a series of short surveys of around 500 firms, deeper dives into specific areas with a smaller selection of firms and consumer research. Where we identify concerns we will take action. We continue to review the TSG and will consider whether changes are needed to the Handbook on forbearance and debt advice following our assessment of the evidence gathered. We have also consulted on proposals to take robust action in the debt packager market.
Given the ongoing coronavirus situation we remind firms of the outcomes we want to see for customers in payment difficulties because of the pandemic. We believe the TSG for mortgages, consumer credit and overdrafts continues to provide an appropriate framework for lenders to support these customers. The TSG is designed to enable firms to deliver short and long-term support to customers affected by the pandemic. It is intended to support firms to treat consumers fairly and to help them get back to a more stable financial position. We want firms to deliver the following outcomes:
- Customers receive appropriate forbearance that is in their interests and takes account of their individual circumstances.
- Firms support their customers through a period of payment difficulties and uncertainty, including by considering their other debts and essential living costs.
- Firms recognise the characteristics of vulnerability and respond to customers’ particular needs.
- Firms have systems, processes and adequately trained staff, with any staff incentives aligned with providing customers with the help they need.
- Customers receive the support they need in managing their finances, including through self-help and money guidance. Firms signpost or refer them to debt advice if appropriate.
In addition to the above, for credit:
- Customers are given sustainable arrangements, considering their other debts and essential living costs, which give them reasonable time and opportunity to repay their debt.
- Customers are protected from escalating debt once they have entered a forbearance arrangement with a firm based on what they can afford to pay.
- Customers are allowed time to consider their options and, if necessary, seek debt advice before deciding on the support they need.
We highlight some important aspects of the TSG below, but firms should consider the entirety of the TSG and our corresponding Handbook rules and guidance to demonstrate compliance:
The BiFD project is ongoing, but we want to provide stakeholders with an insight into our interim findings from the regular surveys and deep dives we have undertaken with lenders. This is not our final view and further work we are undertaking may mean these findings will be updated in the future.
Findings from the firm surveys in July, September and November 2021
Our March 2021 findings report identified both the training and oversight of staff as areas requiring further attention. We have therefore done further work, as part of the BiFD project, to assess the approach to quality assurance and oversight adopted by several large UK retail lenders as well as a review of the training, quality assurance and oversight by small and medium sized secured and unsecured lenders.
When training new staff, we found firms used several approaches ranging from one-to-one development to classroom-based lessons, carried out remotely and in-person. We found that:
- The quality of the training differed widely with some firms just relying on existing staff sharing policy and process documents rather than having formal training materials available.
- Most firms used formal knowledge assessments and roleplay before staff could progress to engaging with customers. At a small number of firms there was no formal testing before staff were able to speak to customers.
- All firms had training in place to help staff identify customers with vulnerable characteristics although the quality of this varied considerably.
- Training on signposting customers to sources of independent debt advice was provided to varying degrees.
Where we have concerns, we are engaging with firms on both the quality and extent of the training provided.
From our review of quality assurance and oversight we were encouraged to find that many firms are undertaking end-to-end outcome testing. In some cases, firms have just introduced this approach while others are about to do so. Where cases have failed quality assurance, we are pleased that most firms require remedial action to be completed such as recontacting the customer. However, the timescales were sometimes unclear. At a very small number of firms no action to recontact the customer seemed to be required when issues were identified.
The better firms had clear evidence of staff, who had a failed a quality assurance assessment, being taken off customer facing tasks while retraining was undertaken. At a small number of firms we were unable to find evidence of training or coaching being completed in these circumstances.
Good practices identified through this work
We will continue to engage with firms to improve outcomes for borrowers in financial difficulty. As the cost of living rises continue, we expect that more customers will need support from their lenders.
Where necessary, we will use our supervisory and enforcement powers to ensure that customers are protected from poorly performing firms. In some cases, we will also consider asking firms to stop lending where we see that they are delivering poor customer outcomes.
We plan to consult on the future of the TSG, and that may include proposals to make changes to our Handbook.