One in five struggling with bills and credit repayments

Around one in five adults are struggling with bills and credit repayments, according to the Financial Conduct Authority (FCA).

The analysis shows that the number of people burdened by these financial challenges has increased from around 7.8m (15%) in May 2022 to 10.9m (21%) in January 2023. The number of adults who missed bills or loan payments in at least three of the previous six months is estimated to have increased by 1.4m, from 4.2m (8%) in May last year to 5.6m (11%) this January.

Around 28.4m people felt more anxious or stressed due to the rising cost of living in January than six months earlier, while 11% had put off dealing with financial matters, such as leaving post unopened or ignoring warning letters. The FCA says it has repeatedly reminded firms of the importance of supporting customers and working with them to solve problems with payments.

The FCA has reminded borrowers they can get help from their lenders if they are struggling to keep up with payments, as it found the number of people struggling to meet bills and credit repayments has risen by 3.1m since May 2022 (10.9m, compared to 7.8m in May 2022).

The number of adults who missed bills or loan payments in at least three of the last six months has also gone up by 1.4 million, from 4.2 million to 5.6 million over the same period.

The FCA has repeatedly reminded firms of the importance of supporting their customers and working with them to solve problems with payment, including by writing to industry bosses to make sure they are aware of the regulator’s expectations.

Where firms haven’t supported their customers properly, the FCA has told them to make changes. It reminded 3,500 lenders of how they should be supporting borrowers in financial difficulty and told 32 lenders to make changes to the way they treat customers. This work has led to £29 million in compensation being secured for over 80,000 customers.

Sheldon Mills, Executive Director of Consumers and Competition said “Our research highlights the real impact the rising cost of living is having on people’s ability to keep up with their bills, although we are pleased to see that people have been accessing help and advice.”

“If you’re concerned about your finances, you do not need to worry alone. We’ve told lenders that they should provide support tailored to your needs. And, if you find yourself in debt or want to know more about how to manage your finances, free expert advice is available.”

“We will continue to act quickly to make sure financial firms help their customers who are facing financial difficulty or are worried they might be soon.”

The support needed to deal with the rising cost of living goes beyond what is provided by the financial services sector. As a result, the FCA continues to work with other regulators and debt organisations to drive better coordination and help make sure customers are treated fairly and supported if they get into financial difficulty.

The FCA will also be introducing the Consumer Duty in the summer. The Duty will be the driving force behind its consumer protection work, as it will require firms to act to deliver good outcomes for consumers and make sure that they are properly supported while using a financial product or service.

Responding to the figures, Richard Lane, Director of External Affairs at StepChange, said “The FCA is right to highlight the plight of struggling borrowers. With millions of people struggling to keep up with repayments, we would urge firms to be proactive in identifying customers who are showing signs of difficulty at an early stage and focusing any communications on where to find help and tailored support, like signposting to free debt advice. We know from our own research that consumers in difficulty are unlikely to engage with communications that simply demand payment under threat of sanctions.”

“The last twelve months has seen household budgets endure setback after setback, with once-in-a-generation levels of inflation compounded by rising interest rates and housing costs. Millions have had to make sacrifices in order to stay afloat, but many simply do not have the room in their budgets to absorb the dramatic price rises we’ve seen. As a result, demand for our services is at its highest level in more than three years, and we expect this to continue as cost pressures show little sign of abating.”

Helen Undy, Chief Executive of the Money and Mental Health Policy Institute, said “We welcome this reminder from the FCA that creditors should be proactive in supporting their customers – particularly in light of today’s new research showing how the financial and psychological impacts of the cost of living crisis are only getting worse.”

“However, with increasing numbers of people struggling, the FCA must do more than just urge firms to do what they can to reduce the distress being caused by the crisis. The regulator needs to take urgent action themselves to crack down further on aggressive debt collection practices and put a limit on the number of times firms can contact people who have missed payments. Those actions would go a long way in mitigating the mental health impacts of the crisis, and could even save lives.”