As a lender, your regulatory obligations under the Financial Conduct Authority (FCA) rules mean you must treat borrowers fairly – especially those facing financial pressure due to the cost-of-living crisis. While temporary pandemic-era measures like Tailored Support Guidance have been withdrawn, the FCA has reaffirmed that support for financially vulnerable customers must now be embedded in your day-to-day operations. From updated guidance like FG24/2 to increased supervisory scrutiny, it’s essential that you identify borrowers in financial difficulty, tailor your support, and manage affordability risk across your customer base.
Our financial services solicitors can help you navigate and implement these regulatory expectations effectively – whether you're updating internal procedures, dealing with enforcement concerns, or ensuring your teams are equipped to deliver compliant customer outcomes.
Contents:
- Treating borrowers fairly
- What are the rules on treating borrowers fairly?
- The end of temporary support: what replaced it?
- The FCA’s expectations of firms
- Where might you be falling short?
- What about small business customers?
- What should you do when customers face payment difficulties?
- Check your agreements and procedures
Treating borrowers fairly
Under FCA rules, you must treat all borrowers – new and existing – fairly, especially those facing financial difficulty. In practical terms, this means providing support tailored to each customer’s situation, maintaining clear communication, and avoiding actions that make a tough situation worse, such as imposing unfair fees or applying rigid procedures. The FCA has also indicated that its earlier guidance, originally issued in response to the coronavirus pandemic, should be applied in the context of the cost-of-living crisis as well
What are the rules on treating borrowers fairly?
The FCA’s Principles for Businesses (‘PRIN’) set out the general standards you’re expected to meet. Principle 6, which requires you to pay due regard to customers’ interests and treat them fairly, is especially relevant here.
More detailed requirements are set out in the FCA Handbook. In particular, CONC 7.3.4R requires firms to treat customers with forbearance and due consideration when they are in or approaching arrears, or in default.
The end of temporary support: what replaced it?
During the pandemic and the early stages of the cost-of-living crisis, the FCA issued temporary Tailored Support Guidance (TSG) to help you respond to exceptional borrower needs. That guidance was withdrawn in November 2024. You must now comply with the FCA’s long-term expectations.
In FG24/2: Guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living, the FCA sets out how it expects you to meet your regulatory obligations. While not binding, this guidance reflects the FCA’s view of best practice and will inform supervisory assessments.
The FCA’s expectations of firms
The FCA expects you to:
- Engage early and proactively with customers showing signs of financial pressure, don’t wait for missed payments
- Offer tailored forbearance that genuinely reflects each customer’s individual circumstances
- Support customers in difficulty, whether they are already behind or just beginning to struggle
- Communicate clearly and consistently to help customers understand their options
- Identify and respond to vulnerability appropriately, offering extra care and flexibility where needed
- Ensure that fees and charges are fair and reflect your actual costs
- Consider affordability at the onboarding stage, accounting for cost-of-living pressures
- Encourage switching where suitable, for example, to help mortgage borrowers access cheaper deals
- Help customers avoid harm by raising awareness of scams and illegal lending
Where might you be falling short?
The FCA has identified common failings in how some lenders support customers in difficulty, including:
- Inadequate assessment of customer circumstances
- Poor support for vulnerable customers
- Unfair fees and charges
- Lack of clear and timely communication
- Weak complaint handling and failure to address root causes
- Deficient product oversight and governance
- Systemic failures in arrears handling
These findings show that the FCA is focusing more on customer outcomes. You’re expected to take action to address any weaknesses and ensure that your systems and staff are equipped to support borrowers fairly.
What about small business customers?
The FCA has emphasised that small business borrowers – especially sole traders and small partnerships (of two or three partners) – should be treated fairly and consistently, particularly when facing financial difficulty.
A 2022 FCA review of 11 banks highlighted issues such as unaffordable repayment plans, poor support for vulnerable business owners, and inconsistent training. Since then, attention has expanded to cover personal guarantees in business lending.
Although the FCA has limited direct oversight of SME lending, it expects you to apply the same principles of fairness, clarity, and care to small business customers as to individual consumers – especially when offering support, collecting debts, or handling complaints.
What should you do when customers face payment difficulties?
If a customer shows signs of payment difficulty, you should:
- Engage early and constructively – don’t wait for missed payments
- Work with the customer to agree a realistic and sustainable repayment plan
- Be flexible – offering changes to payment dates, amounts, or methods where needed
- Signpost free and independent debt advice, and cooperate with third-party advisers
- Avoid pressure or escalation too soon – repossession or enforcement should be a last resort
Check your agreements and procedures
You must clearly explain to customers how and when to get in touch if they are concerned about repayments. This information should be easily accessible on your website, in account communications, and in customer information packs.
Make sure your policies and procedures reflect the FCA’s current expectations and are designed to deliver fair outcomes for all customers, including those in vulnerable circumstances. It’s also vital that your staff are properly trained and kept up to date so they can apply these policies and provide the right support when needed. Seek legal guidance if you are unsure what is required.
Supporting borrowers with confidence
In a period of sustained economic pressure, how you support borrowers – whether individuals or small businesses – directly affects both regulatory compliance and customer trust. You must ensure your policies are aligned with the FCA’s rules and expectations, your teams are properly trained, and your customer-facing materials clearly explain available support options.
This includes early and constructive engagement, flexible forbearance, and ensuring vulnerable customers receive appropriate care. If you’re reviewing your lending policies, reassessing product governance, or responding to FCA scrutiny, our financial services solicitors can support you with tailored legal advice to ensure your operations meet both regulatory standards and customer needs.
