CM July and August 2023 digital

CMNEWS
A round-up of news stories from the
world of consumer and commercial credit.
Written by – Sean Feast FCICM
Charity welcomes permanency
in new FCA requirements
STEPCHANGE Debt Charity has
welcomed proposals from the
Financial Conduct Authority
(FCA) which will make
permanent requirements on
lenders to treat borrowers
in financial difficulty fairly. This is
following temporary guidance introduced
during the pandemic. The FCA has also
announced it will act quickly if firms
fail to appropriately support struggling
customers.
Richard Lane, Director of External
Affairs at StepChange, says that demand
for debt advice continues to rise: “High
interest rates and inflation continue to
place immense pressure on household
finances, so the FCA’s proposals to ensure
borrowers have the support they need are
crucial.
“Our own research has shown that
people showing signs of financial
difficulty need help as early as possible to
prevent them getting trapped in a spiral
of harmful, unaffordable borrowing in
order to make ends meet.
“Communications from lenders making
demand for payment can be frightening
for people experiencing problem debt,
causing them to disengage, an issue
which we’ve found to be more prominent
among borrowers with additional
vulnerabilities.”
The Charity also recently welcomed the
FCA ban on debt packaging firms from
receiving referral fees. It believes the ban
will help to prevent financially vulnerable
consumers in need of debt advice from
being preyed upon by unscrupulous firms
driven by financial incentives rather than
the best interests of the client.
Recent data from StepChange,
published in June, suggests that more
than a quarter (27 percent) of new clients
cite the cost of living as their main
reason for debt, up from 15 percent a year
ago.
After a year of inflated prices for
gas and electricity, more and more
households are struggling with energy
debt. Almost three in five new clients
(58 percent) are in arrears with their
dual fuel bills, which has increased by
three percentage points compared to the
previous calendar month, among those
with a responsibility for paying dual fuel
bills.
These findings mirror research from
Christians Against Poverty that reported
a sharp rise in unsustainable budgets
leaving the average person £242 short
each month. It found that over half of
those surveyed have regularly skipped
meals (54 percent) — an increase from 47
percent the previous year; and over half
been unable to afford to heat their homes
(51 percent) — up from 45 percent in 2022.
The most common reasons for needing
to borrow money were to pay for food,
clothing or essential living costs (56
percent) or to cover a household bill (53
percent). More than half (55 percent) have
mental ill-health showing the impact of
poverty on people’s wellbeing.
CAP wants the UK Government and
major opposition parties to make tackling
poverty a key priority in their manifestos
to show their commitment to helping
people recover from the current cost-ofliving
crisis.
“Communications
from lenders
making demand
for payment can
be frightening
for people
experiencing
problem debt,
causing them to
disengage.’’
Brave | Curious | Resilient / www.cicm.com / July & August 2023 / PAGE 6