Rules on forbearance, sustainable repayment arrangements and repossession as a last resort took effect

Rules in the Financial Conduct Authority's Consumer Credit sourcebook covering the treatment of customers in or approaching arrears or in default took effect on 4 November 2024. The provisions, numbered CONC 7.3.4R, 7.3.4BR, 7.3.5BR, 7.3.5DR, 7.3.5GR, 7.3.17R, 7.3.17AR and 7.3.18R, apply to lenders, owners and debt collectors¹.

CONC 7.3.4R states:

Under CONC 7.3.4A, a firm should regard a customer as approaching arrears when the customer tells it they are at risk of missing one or more repayments¹. CONC 7.3.4BR requires a firm to take into account the individual circumstances of the customer of which it is, or should be, aware when deciding what forbearance is appropriate¹.

CONC 7.3.5 sets out examples of forbearance, which it says are not exhaustive. They include suspending, reducing, waiving or cancelling further interest or charges; deferring payment of arrears; accepting no payments, reduced payments or token payments for a reasonable period; agreeing a repayment arrangement allowing a reasonable period to repay; refinancing the debt to an alternative credit agreement; and, for pawnbroking agreements, extending the redemption period or suspending a sale¹.

CONC 7.3.5C states that a repayment arrangement is unlikely to be sustainable if it leaves the customer unable to meet priority debts and essential living expenses, which it says include mortgage, rent, council tax, food and utility bills¹. CONC 7.3.5E says an income and expenditure assessment should be informed by sufficiently detailed information, and that a firm may have regard to the spending guidelines in the Standard Financial Statement or an equivalent tool¹. CONC 7.3.5F says a firm should have clear written policies setting out how and when it conducts such assessments¹.

CONC 7.3.5H notes that the extent of any reduction, waiver or cancellation of interest and charges may vary over the term of an arrangement, and that if a customer's circumstances improve so they can pay larger amounts, the firm will not be required to waive as much to prevent the balance escalating¹.

The rules sit alongside CONC 7.3.2, which states that when dealing with a customer in or approaching arrears or in default, a firm should pay due regard to its obligations under Principle 6 (Customers' interests) or the Consumer Duty, as applicable¹.

Why it matters for households

The rules apply to people who have fallen behind on credit repayments, or who have told a lender they are at risk of doing so, and cover lenders, owners and debt collectors¹. They took effect on 4 November 2024¹.

For anyone in that position, the rules set out what a firm must or should do. A firm must treat the customer with forbearance and due consideration, and must consider the customer's individual circumstances¹. Where a repayment arrangement is agreed and the customer keeps to it, the firm must reduce, waive or cancel further interest or charges so the balance does not rise during the arrangement¹. Any arrangement must be sustainable, and an arrangement that leaves the customer unable to meet priority debts such as mortgage, rent, council tax, food and utility bills is unlikely to be sustainable¹.

The rules also cover how a firm assesses what a customer can afford. Any income and expenditure assessment must be objective, should be based on sufficiently detailed information, and may use the Standard Financial Statement spending guidelines or an equivalent tool¹.

What happens next

The rules are in force from 4 November 2024¹. No further commencement dates for these provisions have been reported.

Households wanting the practical position on how lenders must treat you when you fall behind can read the site's guide, along with the page on when you cannot afford to pay more.