FCA chief executive encourages people in financial difficulty to get help early

11 April 2024, 17:44

Financial issues
A house-shaped money box. Picture: PA

Nikhil Rathi was speaking during a visit to Birmingham, where he met organisations supporting people with money issues.

Financial Conduct Authority (FCA) chief executive Nikhil Rathi has encouraged people who are struggling financially to seek support early as “there is help available”.

He was speaking after visiting organisations in Birmingham on Thursday which help people with money issues.

He visited the England Illegal Money Lending Team (IMLT), which investigates illegal money lenders and supports people who have borrowed from loan sharks.

The organisation works alongside the FCA to investigate those operating in the consumer credit market without appropriate authorisation.

Mr Rathi told the PA news agency he had heard about some “harrowing cases” from the IMLT, “sometimes running for a number of years, and serious organised criminals preying on some very vulnerable people and very vulnerable communities right across the country”.

Research released by the FCA this week indicated 7.4 million adults across the UK felt heavily burdened keeping up with domestic bills and credit commitments at the start of 2024.

This was an improvement from about 10.9 million in January 2023 but still higher than around 5.8 million in February 2020, before the cost-of-living squeeze started.

Asked if the volume of people who are struggling could increase the risk that some may consider turning to a loan shark, Mr Rathi told PA: “We’ve clearly been through a very challenging period with cost-of-living pressures… I think in that kind of circumstance, there is a risk that people may reach out to illegal money lenders or may not address the situation early.

“And our advice is there is help available… there are free services like (Government-backed) MoneyHelper, or indeed, charities like Citizens Advice, that you can turn to and speak openly about your situation and we would always encourage people to seek support early and talk about their situation.”

He also highlighted FCA figures indicating two in five people had avoided talking to their lender about their finances “and that can risk making it worse”.

The FCA’s research found 40% of adults who had fallen behind on their bills had avoided talking to their lender about their finances.

Nearly half (47%) of those who sought help had reported being in a better position as a result.

Mr Rathi added: “We definitely encourage people to engage early and consider getting advice and support.”

He said he had been encouraged during his visits by a “general sense” that lenders are being proactive and considering options to support customers where forbearance is appropriate and taking a personalised view.

A new consumer duty was introduced last year requiring financial firms to put customers at the centre what they do.

Mr Rathi described it as “a very significant piece of legislation”.

He said: “That builds on other work we’ve done, for example, during the pandemic and afterwards on specific guidance for borrowers in financial difficulty.

“So we are seeing from firms more proactive communication, earlier communication, active consideration of a range of different options that might be able to be used by borrowers in financial difficulty.

“And in some of the products, looking at more simplified language when they’re selling products and in some cases tackling some fees that they may no longer think are justifiable or practices which have led to poor customer service.

“So we are seeing some good progress, there are some areas where we have concerns and we’ve been public about those and we’ll be working on those in the coming months.

“But certainly, when it comes to how lenders have acted, generally speaking we’ve seen a positive picture.”

He added: “We have cracked down on lenders that aren’t properly supporting customers in financial difficulty.”

The FCA has also confirmed stronger protections for borrowers. It is making permanent the expectation on lenders to support borrowers in difficulty, which were introduced during the coronavirus pandemic, with additional changes to improve outcomes for consumers.

Mr Rathi also visited the Money Advice Trust, which helps people tackle their debts. The charity runs the National Debtline, which offers free debt support.

The visit was part of regular trips Mr Rathi is making to locations around the UK.

He said: “We have a very large number of regulated firms outside London and the South East… it’s a chance to understand the issues they’re facing in running their businesses, the impact of recent regulation and just to get their view on the economic outlook and what they’re seeing from consumers too.

“Alongside that I had a really good chance to talk to people about issues like financial inclusion, cost-of-living pressures that people are facing and also listening to calls on a debt advice line to just get a sense, right on the coalface, as it were, of the kind of issues that these really excellent organisations are dealing with.”

He added: “We want to make sure that we’re understanding the picture right around the country.”

By Press Association