FCA updated MCOB 13.3 rules on payment difficulties, vulnerable customers and record keeping

The Financial Conduct Authority updated its rules on how mortgage lenders and administrators treat customers in payment difficulties, with the changes taking effect on 4 November 2024. The provisions sit in MCOB 13.3 of the FCA Handbook, which covers dealing fairly with customers, and include MCOB 13.3.1C, 13.3.2A, 13.3.4A and 13.3.9¹.

Under MCOB 13.3.1C, dated 04/11/2024, a firm "must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers whom the firm understands, or reasonably suspects, to be vulnerable"¹. Firms are directed to the FCA's guidance on the fair treatment of vulnerable customers, FG21/1, when developing those policies¹.

MCOB 13.3.2A, also dated 04/11/2024, sets out what firms must do for customers who have or may have payment difficulties. These include informing a customer that free and impartial money guidance and debt advice is available, including from not-for-profit bodies, and signposting or referring them to suitable sources¹. Firms must make reasonable efforts to agree a method of repaying any shortfall, allow a reasonable time for repayment, and "not repossess the property unless all other reasonable attempts to resolve the position have failed"¹. Firms must also "grant, unless it has good reason not to do so, a customer's request for a change to" the payment date within the same payment period, or the payment method, giving a written explanation if they refuse¹.

MCOB 13.3.4A, dated 04/11/2024, requires firms to consider, with the customer's agreement, options including extending the mortgage term, changing its type, waiving or deferring capital and interest, reducing the interest rate or applying simple interest instead of compound interest, treating a payment shortfall as part of the original amount, or using Government forbearance initiatives¹. Customers must get "adequate information to understand the implications of any proposed arrangement and of not agreeing an arrangement", including "the potential impact on the customer's overall balance and how it will be reported to the customer's credit file"¹.

A capitalisation is material if it increases "the interest payable over the term of the regulated mortgage contract by £50 or more" or "the contractual monthly repayment amount under the regulated mortgage contract by £1 or more"¹. On direct debits, a firm "must not attempt to process more than two direct debit requests in any one calendar month" where a customer has a payment shortfall, and must not "pass on any costs to the customer which were incurred as a consequence of presenting direct debit requests during this period of consideration"¹.

On record keeping, a mortgage lender or administrator "must retain the record required by (1) for three years from the date of the dealing", and that record "must include a recording of all telephone conversations (including video calls) between the firm and the customer which discuss any amount in arrears or any amount subject to payment shortfall charges"².

The handbook shows later dates attached to some provisions: MCOB 13.3.8A is dated 22/07/2025 and MCOB 13.3.8B is dated 26/06/2026¹. The sources do not set out what those provisions require.

Why it matters for households

The rules apply to regulated mortgage contracts and home purchase plans, so they cover borrowers with a mortgage or an equivalent plan who fall behind or tell their lender they are at risk of falling behind¹. A customer counts as having or possibly having payment difficulties if they have a payment shortfall, if they tell the firm they are at risk of one, or if the firm otherwise becomes aware of that risk¹.

For affected households, the rules set limits on lender behaviour rather than offering a product. Lenders cannot present more than two direct debit requests in a calendar month for a customer in shortfall, and cannot pass on costs incurred by presenting direct debits while considering whether the payment method still suits the customer¹. Where a shortfall is capitalised, the £50 interest and £1 monthly repayment thresholds determine whether the impact is material, and firms must not automatically capitalise where it would be¹. Repossession is restricted to cases where all other reasonable attempts to resolve the position have failed¹.

The vulnerable customer rule applies to anyone the firm understands, or reasonably suspects, to be vulnerable, and requires written policies and procedures rather than case-by-case judgement alone¹. Firms must also tell customers about free and impartial money guidance and debt advice¹.

What happens next

The 4 November 2024 rules are in force. The handbook records MCOB 13.3.8A as dated 22/07/2025 and MCOB 13.3.8B as dated 26/06/2026¹. What those provisions require has not been reported in the sources.