CONC 5D.3 Interventions to be taken in the case of repeat users

1. (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. (1A)

   When a firm identifies that CONC 5D.3.2R(1)(a) and (b) apply to a customer, it should:3

   1. (a)

      promptly take the action specified in CONC 7.3.7AG(1)(a) to (b) (provision of information to the customer); and3

   2. (b)

      where appropriate to the customer’s circumstances, follow the guidance set out in CONC 7.3.7AG(2) to (6) (further communication with the customer). 3

3. (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.

4. (3)

   For the purposes of CONC 5D.3.2R(3), “reasonable period” is unlikely to be longer than one month.

5. (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:

   1. (a)

      advice on budgeting and money management, for example adjusting payment dates or setting up alerts;

   2. (b)

      [deleted]3

   3. (c)

      [deleted]3

   4. (d)

      forbearance and other support, including doing one or more of the following:3

      1. (i)

         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;3

      2. (ii)

         transferring the overdraft debt to an alternative credit agreement on more favourable terms (refinancing), provided that this would not cause financial hardship to the customer; or3

      3. (iii)

         agreeing staged reductions in the overdraft limit and balance (agreeing a repayment plan).3

   5. (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.

6. (5)
   1. (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.

   2. (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.

7. (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.

1. (1)

   3A measure is unlikely to be sustainable if it has the result that the customer cannot meet their priority debts and essential living expenses.

2. (2)

   Priority debts and essential living expenses include, but are not limited to, payments for mortgage, rent, council tax, food and utility bills.

3What is reasonable in any given case will depend on the customer’s circumstances and the nature of the measure provided, but may include reviewing the terms of the measure at appropriate intervals and responding as necessary. It will also involve reacting appropriately to any relevant information the firm is otherwise made aware of, such as correspondence from a debt adviser.

3When complying with CONC 5D.3.8R:

1. (1)

   the assessment should be informed by sufficiently detailed information; and

2. (2)

   a firm may have regard to the spending guidelines in the Standard Financial Statement or an equivalent tool.

3A firm should have clear written policies setting out how and in what circumstances it conducts income and expenditure assessments.

3When a firm identifies that CONC 5D.3.2R(1)(a) and (b) apply to a customer:

1. (1)

   when engaging with customers, firms are reminded of their obligations to communicate with customers in accordance with Principle 12 and PRIN 2A, or Principle 7, as applicable;

2. (2)

   a firm should make available to customers timely, clear and understandable information which:

   1. (a)

      takes into account the individual circumstances of the customer;

   2. (b)

      is sufficient to enable the customer to understand their financial position in relation to their debt, including how it is reported to the customer’s credit file; and

   3. (c)

      is sufficient to enable the customer to understand their options in relation to their debt, including the potential impact of any forbearance or other support on their overall balance and how it will be reported to the customer’s credit file.

3. (3)

   A firm should consider the most appropriate way to engage and communicate with a customer, and support customers to engage through appropriate channels, changing the channel if necessary to enable the customer to engage with the firm effectively.