Dealing with Vulnerable Customers in the Debt Arena
To say that it has been a challenging year so far would be an understatement and unfortunately it is only going to get worse before it gets better.
Due to this third national lockdown none of us have been able to live our lives normally. The impact of these Government restrictions is becoming more and more of a financial worry especially when considering the negative economic forecasts.
Due to the Government’s intervention coupled with the Financial Conduct Authority’s (“FCA”) instructions which were issued to creditors in March 2020, the level of debt has, so far, been limited.
The FCA’s consultation paper GC19/3 published in July 2019 provides guidance to business on how to deal with vulnerable customers fairly and sets out 4 key drivers of vulnerability:
1. Health – health conditions or illnesses that affect the ability to carry out day to day tasks
2. Life events – major life events such as bereavement or relationship breakdown
3. Resilience – low ability to withstand financial or emotional shocks (e.g no cushion)
4. Capability – low knowledge of financial matters or low confidence in managing money
Due to the continuing unprecedented circumstances many individuals are dealing with vulnerability, which is only set to increase, having concerns for example, over the rise in unemployment (the level of unemployment is predicted to rise quite substantially within the next 4 months or so) and the state of the economy.
The FCA has released its latest Financial Lives survey which confirms that 27.7 million adults in the UK overall are considered vulnerable mainly due to low financial resilience.
In March 2020 an authoritative body came together who provided structure, guidance and support to help those individuals and businesses impacted by COVID.
Due to businesses closing and staff being furloughed, large numbers took advantage of payment deferrals or alternatively holiday breaks across their mortgages, credit cards, personal loans and finance agreements to help deal with the reduced income during lockdown periods. These measures were put in place to help individual’s finances and to go some way to soften the blow they were likely to face as a result of economic hardship imposed by the pandemic.
In addition to The Coronavirus Job Retention Scheme and the ongoing situation, The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 will come into force on 4 May 2021. If debtors quality for this Scheme, it will protect them from their creditors for a certain period of time, amongst other things.