Many people experience problems with their finances at some stage of their lives. And they may experience such problems because they’ve had an unexpected change in their personal or financial circumstances. For example, they may have lost their job or suffered an illness that has stopped them from working for an extended period. This change in circumstances can mean that they have to manage with a reduced income. And this in turn can lead to them experiencing difficulty meeting their existing financial commitments, such as repayments to outstanding credit.
Are complaints about financial difficulties different to irresponsible or unaffordable lending?
Financial difficulty is where a borrower can’t make repayments to existing credit, or they can only do so with difficulty because a change in their circumstances took place after the credit was provided. This is different from irresponsible or unaffordable lending where there’s been no change in the borrower’s circumstances and their finances, at the time the credit was provided in the first place, meant they couldn’t make scheduled repayments, or they couldn’t do so without difficulty.
This page covers instances where borrowers experience financial difficulties when repaying consumer debt other than mortgages. You can read more about how we deal with complaints about financial difficulties with mortgages.
We have separate information about how we deal with the complaints we see about unaffordable or irresponsible lending.
Types of complaints we see
We often see complaints from borrowers who are experiencing financial difficulties. They may say:
- I’m struggling to make my payments and my lender isn’t helping me
- I’m being treated harshly or unfairly by my lender
- I’m being charged more for going over my limit
- my lender has made my financial situation worse
- my lender won’t accept what I’m telling them I can pay
- I’m unhappy with what my lender has offered to do
Handling a complaint like this
As with any complaint, we’ll expect you to work with your customer to get to the bottom of what happened, investigate fairly whether anything went wrong, and – where appropriate – take steps to put things right.
If you don’t reply within the time limits for responding to a complaint, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.
Read more about resolving complaints.
Information we will ask for when we receive a complaint
Once a complaint has been referred to us, we will ask you to provide information about your side of events.
The typical information we would normally expect to see about this type of complaint for includes:
- a statement of account/payment history
- all contact notes from when the customer first contacted you about a problem and all later contact
- details of when it was noted the customer might be experiencing difficulties
- details of what support was offered, or any offers made by the customer
- copies of any payment reminders, notices of sums in arrears, default notices
- details of what information has been reported to the credit reference agencies
- details of any court action including the court order and particulars of the claim
- if the debt has been sold, details of the party that is now the owner
- details of any other party pursuing the debt
- if goods were supplied under the agreement, the current position of the goods (recovered, sold, missing)
We may ask for further information or documents, depending on the circumstances of the case.
Read more about how we handle complaints.
What we look at
In the same way as for other types of complaint, when a consumer contacts us about financial difficulties we’ll ask:
- Did the business do everything it was required to do?
- And if they didn’t, has their customer lost out as a result?
As a reminder, our answer to a complaint will reflect what’s fair and reasonable in the circumstances. And in considering what’s fair and reasonable, we’ll consider relevant law and regulation, regulators’ rules, guidance and standards, codes of practice, and what we consider to be good industry practice at the time.
When looking at a complaint, we’d expect to see that a lender responded positively and sympathetically to a borrower being in financial difficulties.
The key rules and other standards that apply
- Lenders should consider consumers in default or in arrears difficulties with forbearance and due consideration. Examples include:
- suspending, waiving or cancelling any further interest or charges;
- allowing arrears to be deferred where immediate payment could cause payments to be unsustainable or where the term would not be increased excessively;
- accepting token payments for a reasonable period of time in order to allow the consumer to recover from unexpected reduction in income
- Lenders should inform the consumer that free debt advice is available and provide details
- Lenders shouldn’t refuse reasonable affordable repayment proposals made by the borrower, debt counsellor or other person authorised by borrower
- Lenders shouldn’t pressure borrowers to make unreasonably large payments where this will have an adverse impact on their financial position, or pressure them into selling property to repay a loan
- Lenders should take proportionate action against a consumer in arrears or default
You can view this section and the consumer credit sourcebook in full on the FCA's website.
- Lenders should consider consumers in default or in arrears difficulties with forbearance and due consideration. Examples include:
Lenders should take into account the borrower’s circumstances and consider whether it would amount to a fair outcome to pursue, or to continue to pursue, the amount owed.
You can read more on the Lending Standards Board's website.
- Lenders will deal with cases of financial difficulty sympathetically and positively and will do what they can to help borrowers pay what they owe. This may include making new arrangements and will take into account what the borrower has made the lender aware they owe
- Lenders will make sure anyone appointed to collect money is aware of any alternative arrangement already agreed
- Lenders will make sure that borrowers are left with enough money to pay reasonable day-to-day expenses
You can read more on the FLA's website.
What this all means
We’d expect a lender to listen to a borrower, get an understanding of their circumstances and discuss what help is appropriate. Lenders can ask borrowers about their income and expenditure and ask them to complete a form about this. We’d expect a borrower to co-operate with a lender and provide any reasonable information asked for – such as details of any other borrowing they many have or details of any savings and investments.
But we wouldn’t expect a lender to ask for more information than they need. We’d expect a lender to deal with the borrower in an appropriate way – listening to how the borrower wants to communicate and understanding why it may be appropriate to do something differently, depending on the borrower’s circumstances.
A lender should take special care if they know, or have reason to believe, that a borrower is vulnerable. There are guidelines available to help lenders when dealing with borrowers who have certain types of vulnerability – like mental health and capacity limitations.
Once the borrower’s financial position is clear, we’d expect the lender to propose a solution. There is a range of measures a lender can take to help.
- reduce or write-off interest and/or charges, in full or in part
- allow nominal or reduced repayments (for a temporary period), or a payment holiday.
- reschedule or consolidate what's owed onto terms that may be easier for the borrower, for example reducing the monthly payments.
- allow the borrower to terminate a hire purchase agreement and surrender the goods
- where appropriate, write off all or part of the debt
- on a fee paying current account, change it to one with lower or no monthly charges
If a repayment plan is agreed, we’d usually expect the lender and the borrower to stick to it until the agreed review point. The only exception may be when there is an unexpected change in the borrower’s situation – for better or worse – which makes it appropriate to review arrangements ahead of time.
Where a lender accepts reduced payments or grants a payment holiday for a period of time, they should explain that this isn’t a permanent solution and that it could have an impact on the borrower’s overall debt. Sometimes we find that a customer would have acted differently if they had clearly understood the effect of any support their lender had suggested.
Sometimes, a borrower won’t tell their lender that they’re in financial difficulty. This might be because they’re worried about what their lender might say or do. But there are instances when we’d expect a lender to pick up on signs that a borrower is struggling even if the borrower doesn’t say this is the case.
These could be:
- consecutively failing to meet minimum payments on a credit or store card
- adverse accurate entries on a credit file
- outstanding county court judgements
- an inability to meet payments out of disposable income or at all. Examples include:
- non-payments of essential bills
- having to borrow further to repay existing debts
- a borrower only being able to make payments by selling assets
- consecutively failing to meet payments when due
- an agreement to a debt management plan or other debt solution
Other factors that may alert a lender to the fact that a consumer is struggling financially include:
- an overdraft that continues to increase because regular payments into an account have reduced or stopped
- a customer using a credit card to make regular cash withdrawals
When borrowers are experiencing financial difficulties, they might miss payments, enter a repayment plan or where it's clear there’s no reasonable prospect of them repaying what they owe, default on what they’ve borrowed. Most lenders will report this information to credit reference agencies. And borrowers can see what’s recorded on their credit file.
Some borrowers end up unhappy when they see that adverse information has been recorded on their credit file. We get complaints from people who say that:
- what’s recorded isn’t accurate
- the lender shouldn’t be reporting any adverse information
- the record is stopping them from accessing credit which could help their financial situation
There are situations where a payment was missed but it might be because of a mistake the lender made. We’ll look to see that a lender records information which:
- accurately reflects what’s happened with an account
- is a fair reflection of the customer’s ability to repay the debt
If a customer agrees to follow a payment plan to make reduced payments and the lender still records missed payments and arrears, this isn’t technically wrong. The full payments haven’t been made and arrears are accruing. But, in most cases, we think it’s fairer for a lender to record that a borrower is in an ‘arrangement to pay’ rather than recording missed payments, because the lender will have received some payment.
We always expect a lender to do what they can to help a borrower in financial difficulties. But sometimes, a lender will decide that there’s no reasonable prospect of the borrower repaying what they owe and they can’t help a borrower any further. At this stage the lender might decide that the most appropriate or fair step to take would be to place the account "in default". There are rules about what a lender needs to do before taking this action and how they should notify a borrower.
When an account is in default, we usually expect to see that a lender has stopped applying any further interest and charges. The lender will then:
- continue to recover any outstanding debt, taking into consideration the borrower’s financial situation; or
- sell the account to a third-party debt recovery agent, where liability for the debt is passed on to the third party; or
- pass it to a debt recovery agent, where liability remains with the lender
Defaulting an account will have a significant impact on a borrower’s ability to obtain credit for the following six years. So it should always be a last resort. It’s for a lender to decide if and when an account should be defaulted, but we’d expect a lender to take a fair and reasonable approach to this and consider relevant guidance set out by the Information Commissioner’s Office.
A lender might default an account when:
- the relationship has broken down
- a customer doesn’t make any payments for three to six months and doesn’t contact the lender to give any details about their situation
- a lender has agreed a payment plan or plans that have failed, and a default is a way of highlighting that the customer’s problems are long-term
When we look at complaints where a customer says a lender shouldn’t have "defaulted" them, we’ll look into the events that led up to the default being applied. We’ll look at whether you:
- treated the customer fairly when they were in financial difficulty
- defaulted the account in line with the relevant rules and guidelines
If you didn’t do these things, we’ll consider the impact of this and what difference it would’ve made if you’d have done more to help the customer.
Sometimes we’ll find that a lender shouldn’t have "defaulted" an account. But if we ask the lender to remove a default, then there might be an outstanding amount that still needs paying. If there is, a customer might need to pay that. If they can’t, then asking the lender to remove the default might not be the fair thing to do as it’s likely it would only take that action again.
Putting things right
If we think you have made a mistake or treated a consumer unfairly, we'll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn't happened. The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how the customer lost out.
We deal with cases on an individual basis. There’s no standard outcome for a complaint about financial difficulties. We decide what’s fair and reasonable by taking into account relevant law, industry codes and regulatory rules.
We may need to ask customers for more detailed information about their income and expenditure. If we think a lender hasn’t acted fairly, we’ll need to understand what impact this has had on a customer. We’ll then suggest what we feel is fair to put things right.
Where the complaint is about adverse information
We’ll look at any impact a lender’s actions have had on a customer’s credit file. If we think that the lender should have dealt with a borrower’s financial difficulties sooner, then we’ll try to put them in the position they would have been in if the lender had done this at the time. We may ask a lender to amend a customer’s credit file to make sure that it reflects any action we’ve asked them to take.
We’ll also look at the wider impact of inaccurate information on a customer’s credit file. A borrower may say that if the lender hadn’t recorded adverse information, they would have been able to get credit elsewhere. But the information a lender considers when deciding whether to lend can be varied. So we’ll usually ask a consumer for information to show a clear link between what their original lender did wrong and a later lender’s decision to refuse them credit.
We wouldn’t usually tell a lender to offer credit on the same terms as the deal that a consumer may have lost out on. But we could ask a lender to pay compensation for any distress and inconvenience their actions caused.
Credit reference agencies only usually store and report information provided by lenders. So we’ll normally look at complaints against the lender that recorded the information, rather than the credit reference agency. But there may be times when it would be appropriate for us to look at a complaint against a credit reference agency too.
A consumer told us he was struggling to repay his car finance agreement
'My lender won't agree to my repayment proposals'
Business Support Hub
If you want to talk informally about a complaint you've received, you can speak to our Business Support Hub. They can give general information on how the Financial Ombudsman might look at a particular complaint. We also offer guidance on our rules and how we work.
Find out how to contact the Business Support Hub.
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