FCA updated CONC 7.2 arrears and default rules and guidance

The Financial Conduct Authority's Handbook entry for CONC 7.2, which sets out requirements on clear, effective and appropriate policies and procedures for customers in or approaching arrears or in default, was last updated on 4 November 2024¹. The same date applies to a number of rules and guidance provisions in CONC 7.3, which covers the treatment of customers in or approaching arrears or in default, including repossessions, by lenders, owners and debt collectors².

CONC 7.2.1R, effective 4 November 2024, requires a firm to establish and implement clear, effective and appropriate policies and procedures for dealing with customers who are in or approaching arrears or in default, and for the fair and appropriate treatment of customers the firm understands or reasonably suspects to be vulnerable¹. Guidance at CONC 7.2.2 states that customers who have mental health difficulties or mental capacity limitations may fall into the category of vulnerable customers¹. CONC 7.2.2A says firms developing such policies should have regard to the FCA's Guidance for firms on the fair treatment of vulnerable customers (FG21/1)¹. CONC 7.2.3, dated 1 April 2014, says firms may wish to have regard to the Money Advice Liaison Group (MALG) Guidelines "Good Practice Awareness Guidelines for Consumers with Mental Health Problems and Debt"¹.

CONC 7.2.4R, effective 4 November 2024, requires a firm to ensure the effectiveness of those policies and procedures, and its compliance with them, is reviewed at appropriate intervals¹. Guidance at CONC 7.2.5 says a firm should ensure that review includes consideration of the full extent of support provided to some customers under the chapter, and does not only assess individual customer interactions in isolation¹.

In CONC 7.3, CONC 7.3.4R, effective 4 November 2024, states that a firm must treat customers in or approaching arrears or in default with forbearance and due consideration². CONC 7.3.4A says a firm should regard a customer as approaching arrears when the customer indicates they are at risk of not meeting one or more repayments when they fall due². CONC 7.3.4B requires a firm, when determining appropriate forbearance and treating the customer with due consideration, to take into account the individual circumstances of the customer of which the firm is or should be aware².

CONC 7.3.5G lists examples of forbearance, including suspending, reducing, waiving or cancelling further interest or charges; allowing deferment of arrears; accepting no, reduced or token payments for a reasonable period; agreeing a repayment arrangement; refinancing; and, for pawn, extending the redemption period or refraining from or suspending a sale². CONC 7.3.5B requires a firm to take all reasonable steps to ensure repayment arrangements agreed with customers are sustainable, and CONC 7.3.5C states a repayment arrangement is unlikely to be sustainable if the customer cannot meet priority debts and essential living expenses, which include mortgage, rent, council tax, food and utility bills². CONC 7.3.5D requires income and expenditure assessments to be done in an objective manner². CONC 7.3.5G(2) requires a firm to reduce, waive or cancel further interest or charges to the extent necessary to ensure the debt under a repayment arrangement does not rise for the period of that arrangement².

The Handbook also records that CONC 7.3 was last updated on 26/06/2026, a later date than the 4 November 2024 provisions above, and that CONC 7.3.2 and CONC 7.3.3 carry that later date³. The 4 November 2024 version of CONC 7.3.2 refers firms to Principle 12 (Consumer Duty) and PRIN 2A, or Principle 6, as applicable²; the later version refers to Principle 6 or the Consumer Duty, as applicable³. The sources do not set out what else changed on 26/06/2026.

Why it matters for households

CONC 7.2 and CONC 7.3 apply to firms dealing with consumer credit customers who are in or approaching arrears or in default, including lenders, owners and debt collectors². The rules set out what those firms must do: hold policies for dealing with customers in arrears and for treating vulnerable customers fairly, review those policies at appropriate intervals, and treat customers with forbearance and due consideration¹. For a household behind on payments, the guidance describes forbearance measures a firm may take, such as reducing or waiving interest and charges, accepting reduced or token payments for a reasonable period, or agreeing a repayment arrangement². Where a repayment arrangement is in place and the customer is meeting its terms, the firm must reduce, waive or cancel further interest or charges so the debt does not rise over that period². Repayment arrangements must be sustainable, and a firm assessing income and expenditure must do so objectively². The rules also cover customers the firm understands or reasonably suspects to be vulnerable, including those with mental health difficulties or mental capacity limitations¹.

What happens next

The 4 November 2024 provisions are recorded as the last update for CONC 7.2¹. For CONC 7.3, the Handbook records a later update on 26/06/2026, with CONC 7.3.2 and CONC 7.3.3 carrying that date³. No further changes beyond those dates have been reported in the sources.

For how lenders must handle customers who fall behind, see How lenders must treat you when you fall behind. For how to read the Handbook's sourcebooks, see The FCA Handbook: reading CONC, MCOB, BCOBS and COBS.