Addressing Consumer Debt Challenges: Regulatory Expectations and Best Practices

Introduction 

Rising living costs are placing unprecedented pressure on UK households. From soaring grocery bills to

climbing energy prices, consumers are feeling the squeeze—and for many, this means struggling to keep up with existing credit commitments. 

For consumer credit firms, this economic strain translates directly into heightened regulatory scrutiny. The FCA has made it abundantly clear: how you support customers in financial difficulty matters more than ever. Empathetic forbearance practices, and proactive engagement aren't just good customer service—they're regulatory expectations. 

So, what does this mean for your firm? And how can you ensure you're meeting these expectations while continuing to operate sustainably? 

The Current Landscape: Economic Pressure and Consumer Vulnerability 

The cost-of-living crisis has fundamentally altered the financial landscape for millions of UK consumers. Research shows that when temporary support measures (such as payment holidays) end, many borrowers are left facing the full weight of their financial obligations—this can last months or even years. 

The result? Credit scores are under pressure, access to mainstream financial products is becoming harder, and vulnerable customers are increasingly looking for extended and more manageable means of forbearance from existing debt providers.  

For consumer credit firms, this creates a dual challenge: 

• Regulatory risk: The FCA is actively monitoring how firms treat customers in arrears or financial difficulty 

• Operational pressure: Your teams are likely fielding more forbearance requests, complaints, and complex cases than ever before 

  
  

The firms that will thrive through this period are those that can balance commercial sustainability with fair customer outcomes—and crucially, demonstrate that balance to the regulator. 

What the FCA Expects: Key Regulatory Principles 

The FCA's guidance on supporting customers in financial difficulty isn't new, but the intensity of supervisory focus has undoubtedly increased. Here's what regulators are looking for: 

1. Early Identification and Proactive Outreach 

Waiting for customers to fall into arrears before acting is no longer acceptable. The FCA expects firms to: 

• Recognise trigger points that highlight customers who may be at risk 

• Reach out proactively with support options 

• Make forbearance and support channels easy to access 

  
  

2. Robust and Individual Forbearance Options 

Cookie-cutter approaches to forbearance won't cut it. Each customer's situation is unique, and the options offered to them need to reflect that. This means: 

• Considering the sustainability of any repayment arrangement 

• Taking into account whether the customer can afford their priority debts and expenses, like mortgage payments, food and childcare 

• Having a clear policy on when and how income and expenditure assessments will be undertaken 

• Revisiting the arrangements to ensure they remain appropriate, particularly where circumstances change 

  
  

3. Clear and Compassionate Communication 

Jargon-heavy letters and hard-to-navigate phone systems create barriers for customers who are already stressed. Your communication should be: 

• Clear, simple, and empathetic 

• Tailored to the customer's circumstances 

• Delivered through accessible channels (phone, email, online portals) 

  
  

Best Practices: What Good Looks Like 

So how do you translate these regulatory expectations into day-to-day practice? Here are some approaches we're seeing from firms that are getting it right: 

Build Flexibility into Your Collections Processes 

Rigid collections strategies can push vulnerable customers further into difficulty. Consider building in flexibility so that: 

• Payment arrangements can be adjusted as circumstances change 

• Customers aren't penalised for seeking help early 

• Your approach reflects the severity and likely duration of the customer's difficulty 

  
  

Train Your Frontline Teams 

Your customer-facing staff are often the first point of contact for customers in distress. Make sure they're equipped to: 

• Recognise signs of vulnerability 

• Ask the right questions to understand the customer's full situation 

• Offer appropriate support without delay or escalation where possible. We see better outcomes where customer contact teams have some level of flexibility to offer breathing room and other early interventions.  

  
  

Monitor Outcomes, Not Just Activity 

It's easy to track how many forbearance arrangements you've put in place—but are those arrangements actually helping? Regularly review: 

• Whether customers are successfully completing arrangements 

• Complaint themes and root causes 

• Whether certain customer segments are being disproportionately affected – for example, do some customers end up paying more than others when they are in arrears 

  
  

Document Your Approach 

If the FCA comes knocking, you need to be able to show not just what you did, but why you did it. Make sure your policies, procedures, and case notes clearly evidence: 

• What forbearance options were considered and why certain decisions were made 

• How the customer's individual circumstances were factored in and monitored over the life of the arrangement 

• Importantly that the forbearance options offered didn’t worsen the customers outcome in the longer term. 

Looking Ahead: Regulatory Trends to Watch

 

The FCA's scrutiny of consumer credit isn't going away—if anything, it's likely to intensify. Here's what we're keeping an eye on: 

• Increased use of section 166 reviews: Where the regulator has concerns, expect more firms to be asked for independent assessments of their forbearance practices 

  
  

• Thematic work on affordability: The FCA has signalled ongoing interest in how firms assess and evidence affordability, particularly for higher-risk products 

  
  

• Focus on vulnerable customers: Firms that can't demonstrate appropriate treatment of vulnerable customers will face enforcement action 

How Adempi Can Help 

At Adempi, we work with consumer credit firms navigating exactly these challenges. Whether you need: 

• A review of your collections and forbearance policies 

• Support designing or improving affordability assessments 

• Training for your customer-facing teams on vulnerability and fair treatment 

• Help responding to regulatory queries or preparing for supervisory engagement 

…we can help. 

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Our consultants combine deep regulatory expertise with practical, commercial insight—because we know you're not just trying to satisfy the regulator. You're trying to run a sustainable business that treats customers fairly.

You can reach us at contact@adempi.co.uk or on 0203 925 4761 

Or to prepare your business for whats next or find out more about our services from the website: Adempi - FCA Compliance Consultants.