FCA and PRA licenses (authorisations) and ongoing compliance support, training, recruitment. Contact us 7 days a week, 8am-11pm. Free consultations. Phone / Whatsapp: +4478 3368 4449  Email: hirett.co.uk@gmail.com

← Return to the Table of Content for all MCOB pages

Financial Difficulties Policy

1. Policy

The company are committed to ensuring that all customers receive a fair, transparent and open service from us, which includes assessing any risks to the customer based on their financial status. We have a robust policy and procedures in place for identifying, reviewing and handling customers who may be experiencing financial hardship and our objectives and aims regarding this are set out in this policy.

The Financial Conduct Authority (FCA) has provided clear rules in its handbook, under section CONC 1, as to how to assess that a customer is, or may be, experiencing financial difficulties and how to deal with any such customers. the company has strict rules and guidance for its staff on ensuring that any products or services are only provided to customers based on their ability to afford any repayments and their creditworthiness and affordability status are always assessed in conjunction with our objectives in this policy.

2. Purpose

The purpose of this policy is to ensure that we never provide a repayment plan or credit agreement to a customer where there is the possibility of them being in or experiencing financial difficulties. We aim to ensure that our customers experience a fair and clear service when forming a relationship with us, which includes assessing a customer’s ability to meet any repayments during the contractual period.

the company has clear and defined measures and controls in place to help prevent causing further financial stress to any customer and where a credit agreement or repayment plan is already in place, we have detailed procedures in our Arrears Policy & Procedure document for dealing with customer in financial hardship.

We provide frequent and consist staff training on the objectives set out in this policy as well as the requirements set out by the FCA in section CONC 1 and MCOB 13 of their handbook. We are committed to ensuring that all customers are in a position to afford any repayments that we set up and we will refrain from lending or setting up credit agreements where the customer’s affordability assessment and/or their credit check have failed out minimum requirements.

3. Scope

The policy relates to all staff (meaning permanent, fixed term, and temporary staff, any third-party representatives or sub-contractors, agency workers, volunteers, interns and agents engaged with the company in the UK or overseas) within the organisation and has been created to ensure that staff deal with the area that this policy relates to in accordance with legal, regulatory, contractual and business expectations and requirements.

4. Related Documents

This policy is used by the company in conjunction with the below policy and procedure documents, which help us to ensure that we always identify, assess, review and handle and financial hardship account using a standardised approach and in compliance with the regulatory requirements.

  • Vulnerable Customers Policy
  • Responsible Lending Policy
  • Treating Customers Fairly Policy & Procedures
  • Arrears Policy & Procedures
  • CPA Policy & Procedures
  • Affordability Assessment Calculator
  • [Add/Delete]

5. Objectives

The company addresses the aspect of customers experiencing financial difficulties in a number of our policies and procedures (e.g. Vulnerable Customers, Continuous Payment Authority, Arrears Management etc.), and have taken measures to ensure that our staff are confident and knowledgeable when dealing with a customer who may be or is experiencing financial hardship.

As a firm, we are committed to offering a fair, transparent and cooperative approach to customers who may be struggling financially, emotionally or physically; and we have created a foundation of Treating Customers Fairly and Vulnerable Customer handling on which our principles, objectives and procedures are built.

Our staff are fully aware of the circumstances and situations that can indicate that a customer is in financial difficulty and we have developed and implemented scripts, support manual, guidance notes and procedures so that our staff are better able to handle any such situation.

In addition to the indication of financial difficulty that our staff have been made aware of, they have also been provided with the FCA’s non-exhaustive indications as below: –

  • consecutively failing to meet minimum repayments in relation to a credit card or store card
  • adverse accurate entries on a credit file, which are not in dispute
  • outstanding county court judgements for non-payment of debt
  • inability to meet repayments out of disposable income or at all, for example, where there is evidence of non-payment of essential bills (such as, utility bills), the customer having to borrow further to repay existing debts, or the customer only being able to meet repayments of debts by the disposal of assets or security
  • consecutively failing to meet repayments when due
  • agreement to a debt management plan or other debt solution
  • evidence of discussions with a firm (including a not-for-profit debt advice body) with a view to entering into a debt management plan or other debt solution or to seeking debt counselling

Where the customer is showing signs of or experiencing financial hardship, we always ensure that we signpost access to free and impartial help for the customer and include the below contacts in our communication with the customer.

6. Procedures

[If you already have existing financial difficulty procedures, insert them here]

6.1 Prevention

Where possible, it is the company’s aim to prevent an account from entering arrears in the first instance. Where previous arrears have occurred, or the customer has already notified us of a financial difficulty situation, the account is to be flagged and monitored and close communication kept with the customer for a specified period.

Offering options such as missing a payment and making a double payment the next month or accepting lower instalments for a set period and then increasing the payments to make up the shortfall can often prevent an arrears situation from developing.

Where a customer is not yet in a relationship with us and they are applying for a loan or credit, we will always carry out a full credit check and affordability assessment to ensure that they are in a financial position to meet the ongoing repayments.

6.2 Mortgage Arrears and Sale Shortfalls

In regard to mortgage arrears or sale shortfalls, the company makes every reasonable effort to reach an agreement with a customer over the method of repaying any payment shortfall or sale shortfall. It is always our aim and intent to come to a suitable arrangement with a customer as an alternative to taking possession of the property.

To this end, we aim in every case to: –

  • Liaise with any 3rd party source of advice (where the customer makes arrangements for this), regarding the payment shortfall or sale shortfall
  • Allow a reasonable time over which the payment shortfall or sale shortfall should be repaid, having particular regard to the need to establish, where feasible, a payment plan which is practical in terms of the circumstances of the customer
  • Grant, where possible and feasible, a customer’s request for a change to:
    • the date on which the payment is due (providing it is within the same payment period)
    • the method by which payment is made
  • Where it is not possible or feasible to grant the above change, we always provide the customer with a written explanation of our reasons for refusal
  • Where no reasonable payment arrangement can be made, we allow the customer to remain in possession for a reasonable period to affect a sale
  • We never repossess the property unless all other reasonable attempts to resolve the position have failed

In addition to the above procedures and objectives and in relation to a regulated mortgage contract or home purchase plan, we always consider a case on its individual merits and where possible and appropriate, we will also consider: –

  • Extend the term
  • Change the type
  • Defer payment of interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall)
  • Treat the payment shortfall as if it were part of the original amount provided
  • Make use of any Government forbearance initiatives in which we choose to participate

Where we propose any of the above arrangements to a customer, we always provide in writing, an adequate explanation and information document so that the customer can read, digest and understand the implications of any proposed arrangement.

6.2.1 Record Keeping

In regard to any customer whose account has a payment shortfall or a sale shortfall, the company keeps strict and robust records of all transactions, communications, and arrangements in regard to our dealings with the customer. This includes: –

  • Letters sent and received
  • Telephone call recordings
  • Arrangement details
  • Discussions between ourselves and the customer

Such records are retained by us for three years from the date of the dealing. Our record log contains the below information: –

  • The date of first communication with the customer after the account was identified as having a payment shortfall
  • In relation to correspondence issued to a customer with a payment shortfall, the name and contact number of the employee dealing with that correspondence
  • The basis for issuing tailored information in accordance with MCOB 13.7.1 R in relation to a loan solely for a business purpose
  • Information relating to any new payment arrangements proposed
  • The date of issue of any legal documents
  • The arrangements made for sale after the repossession (whether legal or voluntary)
  • The date of any communication summarising the customer’s outstanding debt after sale of the repossessed property
  • The date and time of each call

[Insert the external location of your Record Log as per the above]

6.3 Assessment

Our pre-lending checks include: –

Affordability Assessment

We use a pre-defined assessment calculator to assess the customers’ income, expenditure and other creditor commitments and use this information alongside evidence of income (wage slips, benefits etc), to obtain their monthly disposable income. We then use this figure to ascertain if they are in a position to afford any repayments.

Credit Checks

We use Experian/Equifax/CallCredit to assess the customers’ current credit status and score and obtain information about any outstanding County Court Judgments, Bankruptcy Orders or IVA’s. We also assess their current financial obligations and any defaults on their account.

6.4 Ongoing Monitoring

We assess all accounts and credit agreements on an annual basis to identify if any customers have developed financial difficulties during their contract period. This ongoing monitoring includes: –

Contacting any customer who has missed or delayed one or more payments and completing an affordability assessment and new credit check

Flagging accounts where a customer has made one or more late payment (even if all payments are up to date) and monitoring that account on a monthly basis. Where more than 3 payments are made after the due date, the customer is contacted to discuss the reasons for late payment and the due date is either changed (i.e. if the customer’s pay day has been moved) or an affordability assessment is completed.

Staff are provided with quarterly training sessions which includes: –

  • Financial Difficulties
  • Assessing Affordability
  • Vulnerable Customers
  • Dealing with Arrears Accounts
  • Responsible Lending
  • Treating Customers Fairly
  • FCA Regulatory Requirements

7. Responsibilities

7.1 The company will ensure that all staff are provided with the time, training and support to learn, understand and implement the Financial Difficulties Policy and Procedures and the related TCF, Arrears and Vulnerable Customers policies. Management are responsible for a top down approach and in ensuring that all staff are included and have the support needed to meet the regulatory requirements in this area.

7.2 The Compliance Officer is responsible for all Financial Difficulty, Arrears Accounts and Vulnerable Customer audits and gap analysis monitoring and their subsequent reviews and action follow ups, with a view to ensuring that regulatory, contractual and legal requirements are being met and that business objectives are being achieved.