FCA confirms final rules in PS24/2 with just over 6 months implementation period

The Financial Conduct Authority (FCA) published Policy Statement PS24/2 on 1 April 2024, setting out final rules to strengthen protections for mortgage, consumer credit and overdraft customers in financial difficulty¹. The rules come into force on 4 November 2024, and the FCA will withdraw its coronavirus Tailored Support Guidance (TSG) at the same time¹.

The FCA consulted on the proposals in May 2023 through Consultation Paper CP23/13¹. It received 39 responses from stakeholders including firms, trade bodies and consumer groups, and said it is finalising most of the rules and guidance broadly as consulted, with some amendments¹. The FCA said it is giving firms just over six months to implement the changes, after some industry respondents asked for a 12-month implementation period alongside other regulatory requirements such as the Consumer Duty¹.

The policy statement says it will primarily affect consumer credit lenders (including MCD article 3(1)(b) lenders), premium finance firms, mortgage lenders and administrators, home purchase providers and administrators, and firms carrying out activities in relation to consumer hiring, operating an electronic system in relation to lending, or debt collecting¹. It also covers consumer credit and mortgage lenders in supervised run-off under the financial services contracts regime, and Gibraltar-based consumer credit and mortgage lenders passporting into the UK¹.

Among the amendments, the FCA said it is changing proposed guidance for credit including overdrafts so that priority debts and essential living expenses include, but are not limited to, payments for mortgages, rent, council tax, food and utility bills¹. For mortgages, it is changing proposed guidance so firms should be transparent about the range of forbearance options they may consider, rather than will consider¹. It is not introducing proposed guidance under CONC 7.7.6G(2) and (3) on charges, and is not progressing proposed guidance at CONC 5D.3.3G(7) on publishing eligibility criteria and interest rates for refinance loans on firms' websites¹. For mortgages, it is making changes to MCOB 13.5 so firms must send regular statements to all customers in arrears, regardless of whether the payment shortfall is attracting charges¹.

The FCA said its rule changes bring a new cohort of customers into scope of MCOB 13, in addition to those in payment shortfall, but that it is not requiring firms to proactively identify whether customers are at risk of falling into a payment shortfall¹. It said the 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 rules take effect on 4 November 2024, when the TSG is withdrawn¹. From that date, the FCA's expectations for how firms treat borrowers in financial difficulty sit in its Handbook rather than in temporary guidance¹. The FCA said many of the Handbook changes make permanent existing expectations under the TSG that have become industry good practice¹.

The policy statement says UK households' financial resilience has weakened following the pandemic and increasing cost of living, and that it is important firms continue to support customers, particularly those in or potentially facing financial difficulty, and those who are vulnerable¹. The FCA said the rules aim to reduce and prevent harm to those in or at risk of payment difficulties by ensuring they are provided with appropriate support¹.

The FCA said it does not consider the rules will negatively impact groups with protected characteristics under the Equality Act 2010, and that they may have a positive impact for persons with the protected characteristic of disability, due to a potentially greater likelihood of these consumers experiencing payment difficulties¹.

What happens next

The rules come into force on 4 November 2024, and the FCA will withdraw the TSG at the same time¹. The FCA said it will engage with a range of stakeholders about the impact of its intervention, and will continue to monitor market and regulatory data and intelligence, including measures relating to customers in financial difficulty, to identify outlier firms and products¹. It said it will also monitor complaints and information from the Financial Ombudsman Service regarding the treatment of customers in financial difficulty¹. Under its Rule Review Framework, the FCA said it will consider whether to take further action if it finds the problems originally identified are still occurring and its remedies have not had the intended effect, or had an unintended effect¹.