CONC 5D.3 Interventions to be taken in the case of repeat users
- (1)
1This rule applies where a firm:
- (a)
identifies that a customer has a pattern of repeat use within the meaning of CONC 5D.2.1R(2)(b);
- (b)
assesses that the customer is likely to continue that pattern of use; and
- (c)
does not consider, acting reasonably, that the customer is one in respect of whom there are signs of actual or potential financial difficulties.
- (a)
- (2)
The firm must communicate with the customer (“the first communication”) in an appropriate medium (taking into account any preferences expressed by the customer about the medium of communication between the firm and the customer) highlighting the customer’s pattern of overdraft use and indicating that the customer should consider whether it is resulting or may result in high avoidable costs.
- (3)
The firm must continue to monitor and review the customer’s pattern of overdraft use after the first communication, and if after a reasonable period the pattern of use continues to be within CONC 5D.2.1R(2)(b), the firm must further communicate with the customer (“the second communication”), reminding the customer of the content of the first communication or reiterating that content.
- (4)
The firm must continue to monitor and review the customer’s pattern of overdraft use after the second communication, and if the pattern of use continues to be within CONC 5D.2.1R(2)(b), the firm must continue to communicate with the customer in similar terms or for a similar purpose at least annually until such time as the pattern of use ceases to be within CONC 5D.2.1R(2)(b).
- (1)
1This rule applies where a firm identifies that a customer:
- (a)
has a pattern of repeat use within the meaning of CONC 5D.2.1R(2)(a); and
- (b)
is one in respect of whom there are signs of actual or potential financial difficulties.
- (a)
- (2)
The firm must communicate with the customer in an appropriate medium (taking into account any preferences expressed by the customer about the medium of communication between the firm and the customer) highlighting the customer’s pattern of overdraft use and indicating that the customer should consider whether it is resulting or may result in high avoidable costs. The firm must encourage the customer to contact the firm to discuss their situation and explain that doing nothing could make things worse. The firm must also provide contact details for not-for-profit debt advice bodies.
- (3)
If after a reasonable period the customer has not contacted the firm and the customer’s pattern of use continues to be within CONC 5D.3.2R(1), the firm must take reasonable steps to contact the customer to discuss their situation.
- (4)
In discussions under (2) or (3) (which need not be on a single occasion), the firm must seek to explore the reasons for the customer’s pattern of overdraft use, as well as the reasons for the customer’s actual or potential financial difficulties, and what (if anything) the customer is doing, or intends to do, to address those issues.
- (5)
If appropriate, in the light of the information gathered under (4), the firm must:
- (a)
identify and set out suitable options designed to help the customer:
- (i)
to reduce their overdraft use over a reasonable period of time; and
- (ii)
to address their actual or potential financial difficulties,
in such a way that does not adversely affect the customer’s financial situation; and
- (i)
- (b)
explain that, if the customer fails to engage in the discussion or fails to take appropriate action to address the situation, one of the possible consequences is that the firm may need to consider the suspension or removal of the overdraft facility or a reduction in the credit limit.
- (a)
- (6)
If the customer declines to contact the firm in response to the communication in (2) and to respond to attempts by the firm to contact them under (3), or to take reasonable steps to take forward an appropriate option under (5) or to otherwise address the situation, the firm must after a reasonable period consider whether to continue to offer the overdraft facility and whether to reduce the credit limit.
- (7)
Sub-paragraph (6) does not apply if the suspension or removal of the overdraft facility or a reduction in the credit limit would cause financial hardship to the customer.
- (1)
1The purpose of CONC 5D.3 is to require a firm to intervene in an appropriate and proportionate manner where it detects repeat use of an overdraft with the aim of reducing that use and improving the customer’s financial situation. A firm should keep in mind, when doing so, the principle that an overdraft is not generally suitable for long-term use that results in a high total cost burden, as well as the need to pay due regard to the interests of its customers and treat them fairly in accordance with Principle 6.
- (2)
CONC 5D.3 does not specify a particular form of words to be used in communications with repeat overdraft users, and firms have discretion to tailor the language and tone of those communications to the circumstances of the individual customer.
- (3)
For the purposes of CONC 5D.3.2R(3), “reasonable period” is unlikely to be longer than one month.
- (4)
Options that a firm could identify for the purposes of CONC 5D.3.2R(5)(a) may include, where assessed as appropriate for the customer:
- (a)
advice on budgeting and money management, for example adjusting payment dates or setting up alerts;
- (b)
providing contact details for not-for-profit debt advice bodies and other relevant bodies (for example, one providing advice on budgeting or money management), and encouraging the customer to contact one of them;
- (c)
the provision by the firm to the customer of alternative credit on more favourable terms (for example a fixed-sum loan repayable by instalments), provided that, if this would be accompanied by suspension or removal of an existing credit facility, this would not cause financial hardship to the customer;
- (d)
forbearance, such as reducing or waiving interest and other charges or (where applicable) allowing additional time to pay, where this does not unduly delay further help to the customer or permit further deterioration of the customer’s financial position; or
- (e)
a reduction in the credit limit or the suspension or removal of the overdraft facility (or reminding the customer that they can ask the firm to take these steps) provided that such reduction, suspension or removal would not cause financial hardship to the customer.
- (a)
- (5)
- (a)
2If an overdraft customer has already been identified by a firm as being in financial difficulties, and is already being treated with appropriate forbearance by the firm, the rules in this section do not require the firm to do anything which is inconsistent with the treatment that it has already adopted in respect of that customer.
- (b)
2Where a Debt Respite moratorium is in effect for a customer’s overdraft and a firm is complying with its obligations pursuant to that moratorium, the firm is treating the customer with appropriate forbearance with respect to the portion of the overdraft that is subject to the moratorium. The firm is not required to take the steps in relation to that moratorium debt under this section during the moratorium, as these steps would be inconsistent with the treatment currently being adopted in respect of that customer.
- (a)
- (6)
Firms are reminded that they should not consider the suspension or removal of the overdraft facility, or a reduction in the credit limit, under CONC 5D.3.2R(6) if this would cause financial hardship to a customer (CONC 5D.3.2R(7)). A firm should give careful thought to the potential effect of suspension, removal or reduction on the customer and consider these steps as part of a response to repeat use only where the firm is confident, on the basis of sufficient information and enquiry, that they would not cause financial hardship in the individual circumstances of the case.