FCA urges consumers to seek help with cost of living crisis
The Financial Conduct Authority (FCA) has urged consumers to seek help as soon as possible if they are struggling as a result of the cost of living crisis, pointing out that many borrowers are missing out on available support.
This comes after research revealed that 42 per cent of struggling borrowers who ignored their lenders’ attempts to contact them had done so out of embarrassment.
Meanwhile, 40 per cent of consumer who were struggling financially incorrectly believed that simply talking to a debt advisor would have a negative impact on their credit file.
The research – which was carried out by the FCA in partnership with the government-funded online advice service MoneyHelper – also found that those who do seek help find it useful.
Almost eight in ten (79 per cent) of people in financial difficulty who used debt advice services said they would recommend it, while 70 per cent said the advice had been more helpful than they expected.
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52 per cent of borrowers in financial difficulty waited more than a month before seeking help. Of these, 53 per cent said they wished they did it sooner.
As a result, the FCA has urged consumers to contact their lender immediately if they are struggling to make their payments, so that the lender can offer support such as staggered or reduced payments.
Last month, the FCA wrote to 3,500 companies, including consumer credit firms, reminding them of the standards they should be meeting as consumers struggle with the rising cost of living.
“Anyone can find themselves in financial difficulty, and the rising cost of living means more people will struggle to make ends meet,” said Sheldon Mills, executive director of consumers and competition at the FCA.
“If you’re struggling financially the most important thing is to speak to someone. If you’re worried about keeping up with payments, talk to your lender as soon as possible, as they could offer affordable options to pay back what is owed.”
Meanwhile, analysts at Hargreaves Lansdown pointed out that younger consumers are more likely to fall into difficulty, noting that the only around a quarter of millennials and generation X are completely on top of an affordable level of borrowing.
“It’s always difficult to admit you’re in trouble and need help,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
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“It’s even more difficult when you’re on a good income and everyone assumes you should be perfectly fine. It can also be a struggle to ask for support when you’re one of the ‘squeezed middle’, and you’re the person everyone else comes to for help. However, the sooner you tackle financial problems, the easier it will be.
“If you’re struggling with debt payments, your first port of call is your lender,” she added.
“You don’t have to wait until you’ve missed payments: you can talk to them even when you see problems looming on the horizon. They have a duty to try to support people who are struggling and agree a more manageable repayment arrangement. If you can’t pay anything for a short period, they may even agree to that.
“For some people, this can feel like walking into the lion’s den, so they can either contact MoneyHelper for support first, or talk to a debt charity like StepChange, who can talk to your lenders for you.”
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