The Financial Conduct Authority (FCA) has reminded borrowers they can get help from their lenders if they are struggling to keep up with payments. And more and more UK consumers are struggling. The FCA reports that the number of people struggling to meet bills and credit repayments has risen by 3.1 million since May 2022 to hit 10.9 million.

The number of adults who missed bills or loan payments in at least three of the last six months has also gone up by 1.4 million, from 4.2 million to 5.6 million over the same period.

The FCA has repeatedly reminded firms of the importance of supporting customers and helping them to solve problems with payment. This includes writing to bank leaders to ensure they are aware of the FCA’s expectations.

Where firms haven’t supported their customers properly, the FCA has told them to make changes. It reminded 3,500 lenders of how they should be supporting borrowers in financial difficulty. And it told 32 lenders to make changes to the way they treat customers. This work has led to £29m in compensation being secured for over 80,000 customers.

Cost-of-living crisis impacts mental health: FCA

The FCA found that the cost of living is having an impact on people’s mental wellbeing. Around half of UK adults, or 28.4 million people, in January 2023 felt more anxious or stressed due to the rising cost of living than six months earlier.

Sheldon Mills, Executive Director of Consumers and Competition said: “Our research highlights the real impact the rising cost of living is having on people’s ability to keep up with their bills. We are pleased to see that people have been accessing help and advice.

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“If you’re concerned about your finances, you do not need to worry alone. We’ve told lenders that they should provide support tailored to your needs. And, if you find yourself in debt or want to know more about how to manage your finances, free expert advice is available.  We will continue to act quickly to make sure financial firms help their customers who are facing financial difficulty or are worried they might be soon.”

UK lenders ‘proactive’: UK Finance

A UK Finance spokesperson said: “The banking and finance industry is fully committed to supporting customers who are struggling with repayments. Today’s report from the FCA highlights that there is a range of tailored support available. Lenders are proactively contacting customers. They will always work with them to find the right solution for their particular needs and circumstances. Anyone who is worried about their financial situation should contact their lender as soon as possible to discuss the options available. Discussing your options with your lender will not affect your credit rating.”

UK banks can learn from CBA: Steve Morgan

Steve Morgan, global banking expert at Pegasystems, added: “Banks can play a pivotal role in helping customers build up their financially resiliency and step in to offer practical and thoughtful help before a financial problem really spirals out of control. Many learnt how to do this during the pandemic lockdowns. For example, Commonwealth Bank of Australia did great work in using intelligent automation and AI to spot early signs of financial difficulty and proactive offer personalised financial support.

To do what the FCA is calling for means banks investing in people, processes and technology that is able to flex, adapt and target assistance where needed. For the latter, what’s essential as CBA found is a decision hub or central brain that deploys contextual strategies instantly to enable employees to talk to the issues at hand while making it easy to explain the potential next steps to solve the problem across all channels.

“Artificial intelligence applied to next best actions can really help augment and support an employee when dealing with a customer. And, communication can also be proactive during this cost of living crisis.

“Banks can monitor a customer’s expenditure and average balance amount, making compelling, personalised interventions to offer support and drive loyalty long term. For example, offering a mortgage redraw where a customer is ahead on their repayments but has short term cashflow needs. An example like this would also link to the Consumer Duty requirements that the FCA has laid out, ensuring the customer is receiving the right appropriate advice and product selection for their need.”