Arrears and default

The CONC rules require firms to have “clear, effective and appropriate policies and procedures” for dealing with customers whose accounts fall into arrears. These rules are set out in CONC7 (here). 

Firms must treat such customers fairly, exercising forbearance and due consideration where appropriate.  This might include:

  • allowing a longer period for repayment;
  • considering suspending, reducing, waiving or cancelling any further interest or charges where a customer provides evidence of financial difficulties and is unable to make repayments as they fall due or is only able to make token repayments;
  • accepting token payments for a reasonable period of time in order to allow a customer to recover from an unexpected income shock;
  • directing the customer to an appropriate source of free and independent debt advice; and
  • negotiating with a customer who is developing a repayment plan.

Lenders should deal with not-for-profit debt advice bodies or other persons who are assisting or acting on a customer's behalf unless there is a justifiable reason for refusing to do so. 

A firm must not pressurise a customer:

  • to pay a debt in one single or very few repayments or in unreasonably large amounts, when to do so would have an adverse effect on the customer's circumstances;
  • to pay a debt within an unreasonably short period of time; or
  • to raise funds to repay the debt by selling their property, borrowing money or increasing existing borrowing.