FCA published Borrowers in Financial Difficulty (BiFD) report

The Financial Conduct Authority (FCA) published its Borrowers in Financial Difficulty (BiFD) report in November 2022, setting out findings on how firms were treating customers in financial difficulty¹. The report found that while some firms were delivering good outcomes for borrowers in difficulty, many firms were falling short of the FCA's expectations, resulting in harm¹.

The report followed a June 2022 Dear CEO letter in which the FCA set out how it expected firms to support customers facing increased financial challenges from the rising cost of living, and how its coronavirus Tailored Support Guidance (TSG) applied in those circumstances¹. The BiFD findings then fed into the FCA's later work on the treatment of borrowers in difficulty¹.

The FCA consulted on rules to strengthen protections for mortgage, consumer credit and overdraft customers in financial difficulty in May 2023 (CP23/13)¹. That consultation proposed incorporating aspects of the TSG into the FCA Handbook, alongside targeted additional changes¹. The FCA received 39 responses from stakeholders including firms, trade bodies and consumer groups¹.

The resulting Policy Statement, PS24/2, was published in April 2024¹. It confirmed final rules and guidance, with amendments to several of the proposals consulted on¹. These included requiring firms to send regular statements to all mortgage customers in arrears, regardless of whether the payment shortfall is attracting charges, and changing mortgage guidance so that firms should be transparent about the range of forbearance options they may consider, rather than will consider¹. For credit including overdrafts, the FCA changed proposed guidance so that priority debts and essential living expenses include, but are not limited to, payments for mortgages, rent, council tax, food and utility bills¹. The FCA did not introduce proposed guidance under CONC 7.7.6G(2) and (3) on charges, and did not progress proposed guidance at CONC 5D.3.3G(7) on publishing eligibility criteria and interest rates for refinance loans on firms' websites¹.

The FCA said the rules primarily affect consumer credit lenders, premium finance firms, mortgage lenders and administrators, home purchase providers and administrators, and certain other firms including debt collectors¹. It said the changes bring a new cohort of customers into scope of MCOB 13, in addition to those in payment shortfall¹. The FCA stated its rules and guidance do not introduce new requirements on firms to take additional steps, or create new processes and systems, to identify customers who may be in financial difficulty¹.

Why it matters for households

The BiFD report concerned how lenders treat customers who are already in financial difficulty or at risk of it, so its findings relate to people behind on mortgage, consumer credit or overdraft payments¹. The FCA's later rules, confirmed in April 2024, set expectations for how firms deal with customers in payment difficulty, including the information they give about how an arrangement will be reported to a customer's credit file in factual terms¹. For mortgage customers in arrears, firms are required to send regular statements whether or not the shortfall is attracting charges¹. The rules came into force on 4 November 2024, and the FCA withdrew the TSG at the same time¹. The FCA said it would monitor market and regulatory data, complaints and information from the Financial Ombudsman Service regarding the treatment of customers in financial difficulty¹.

What happens next

The rules came into force on 4 November 2024, with the TSG withdrawn at the same time¹. The FCA said it would engage with stakeholders about the impact of its intervention and continue to monitor data and intelligence, including measures relating to customers in financial difficulty, to identify outlier firms and products¹. Under its Rule Review Framework, the FCA said it would consider whether to take further action if the problems originally identified are still occurring or its remedies have not had the intended effect¹.