Finalised Guidance
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1 About this guidance
1.1 This guidance is for firms collecting payments under a Bounce Back Loan where the
collection of that debt is a regulated activity.
1.2 The FCA has rules to support the fair treatment of customers through the collections
and recoveries process. In particular, our Consumer Credit Sourcebook Chapter 7
(CONC 7) sets out our rules for the treatment of customers who are in default or
arrears difficulties. Under Principle 6, a firm must pay due regard to the interests of
its customers and treat them fairly. Following this guidance will also help firms to
demonstrate that they have treated their customers fairly.
1.3 CONC 7 applies to firms when they carry out regulated debt collection under the
Bounce Back Loan Scheme (BBLS). Collecting debts under BBLS may be a regulated
activity where the borrower is a sole trader or small partnership. This means that
CONC 7 and Principle 6 can apply to these types of borrowers. This guidance aims to
explain how firms can:
• use and offer Pay As You Grow (PAYG) options in a way that
complies with CONC 7
• recognise vulnerability and respond to the needs of vulnerable customers
• help borrowers who need debt advice
Bounce Back Loan Scheme: guidance for
firms on use of Pay as You Grow options
January 2021
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1.4 It is important for firms to understand our expectations before collecting debts under
BBLS.
1.5 Where CONC 7 does not apply to debt collection under BBLS, firms should refer to
Chapter 5 of this guidance on the Lending Standards Board’s Standards of Lending
practice for business customers.
1.6 In helping customers in default or arrears difficulties, we want firms to deliver the
following outcomes which align with CONC 7 outcomes:
• Firms have due regard to the interests of their customers and treat them fairly.
• Customers are treated with forbearance and due consideration.
• Firms have clear, effective and appropriate policies and procedures for dealing
with customers in payment difficulties and for those who the firm understands or
reasonably suspects to be vulnerable.
• Customers are allowed time to consider their options and, if necessary, seek debt
advice before making a decision on the support they take. Firms refer customers
to debt advice if this is appropriate. Firms do not pressure customers into
repaying their debt within an unreasonably short period of time.
1.7 In Chapter 2 we set out how firms may comply with CONC 7 when offering PAYG
options to borrowers.
1.8 In Chapter 3 we provide guidance on how firms can recognise vulnerability and
respond to the particular needs of vulnerable customers.
1.9 In Chapter 4 we set out the steps that firms can take to help borrowers who need
debt advice.
1.10 In Chapter 5 we remind firms that we recognise the Lending Standards Board’s
(LSB) Standards of Lending Practice for business customers.
1.11 This guidance will apply to:
• firms providing Bounce Back Loans
• debt collection firms working on behalf of lenders collecting and recovering
Bounce Back Loans
1.12 This guidance will come into force on 27 January 2020 and remains in force unless
we vary or revoke it. Guidance is relevant to firm behaviour only to the extent it is
current at the time of the behaviour in question.
1.13 This guidance is without prejudice to the application of CONC 7 more generally.
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2 Providing CONC 7 compliant outcomes for
borrowers
2.1 The Chancellor has set out that PAYG options will be available to all BBLS borrowers.
This includes those whose payments are up to date, or not yet due, as well as those
who are in default or arrears difficulties for the purposes of CONC 7. This guidance
sets out how firms can comply with CONC 7 when providing PAYG options to
borrowers who are in default or arrears difficulties.
2.2 Under Principle 6, a firm must pay due regard to the interests of its customers and
treat them fairly. Following this guidance will help firms demonstrate they have
treated their customers fairly. The delivery of fair and appropriate outcomes for BBLS
borrowers is our key objective in this guidance.
CONC 7.3.4R provision of forbearance and due consideration
2.3 Under our rules (CONC 7.3.4R), firms are required to treat customers in default or
arrears difficulties with forbearance and due consideration. For the purposes of this
chapter and Chapter 3, ‘customers’ refers to customers who are in default or
arrears difficulties.
2.4 In this section, we set out our expectations of how firms can provide forbearance and
due consideration when offering their customers PAYG options (where CONC 7
applies). We outline how firms should approach offering forbearance and support for
customers. We also outline the need to support these customers to choose between
PAYG options and enable them to opt out of any automated online journey if needed.
2.5 Firms can use PAYG options to give customers appropriate forbearance and support.
For many customers, PAYG options will provide the appropriate forbearance they
need. But these options may not on their own be sufficient for all customers or in all
circumstances. In some situations, firms may need to provide customers with
additional support. So, in order to meet CONC 7.3.4R obligations, firms should give
thought to how their processes can be designed to pick up and consider cases where
it may be necessary to offer additional forbearance options.
2.6 When considering what additional support customers might require, firms should
have regard to the examples of treating customers with forbearance in CONC 7.3.5G.
Examples could include the firm, as relevant in the circumstances:
• Considering suspending, reducing, waiving or cancelling any further interest. For
example, when a customer provides evidence of financial difficulties and cannot
make repayments as they fall due or can only make token payments, and their
level of debt would continue to rise if a firm continues to apply interest.
• Accepting token payments for a reasonable period of time to allow a customer to
recover from an unexpected shock to their income. For example, a sole trader
who demonstrates that meeting their existing debts would mean not being able to
meet priority debts or other essential living expenses (such as mortgage, rent,
council tax, food and utility bills).
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2.7 Firms should have clear, effective and appropriate policies and procedures for dealing
with customers. Regardless of the delivery channel or the communication channel
used, firms should treat all customers in a manner that supports them and leads to
appropriate and fair outcomes.
2.8 We know that firms may want to design systems to help support the potentially large
number of customers needing support through periods of financial difficulties. One
way to do this would be to use an automated online journey through which
borrowers can access the different PAYG options before they fall into arrears and
appropriate forbearance when in arrears, which may also include the PAYG options.
2.9 An automated journey can be compatible with our rules, provided it identifies, and
offers further support to, customers who may need forbearance options in addition to
PAYG. It also needs to support customers to make informed choices and should
support vulnerable customers. All customers should have the option to opt out of the
automated customer journey if they choose to, and be able to have an interactive
conversation or engagement with the firm.
Identifying and supporting customers in financial difficulties
2.10 Under our rules – CONC 7.2.1R(1) – firms must establish and implement clear,
effective and appropriate policies and procedures for dealing with customers whose
accounts fall into arrears.
2.11 Regardless of the delivery channel for PAYG options, the identification of borrowers in
default or arrears difficulties would be assisted by firms having a policy of getting in
touch with a customer when they miss a payment on their loan. This could include
not only the first occasion on which they miss a payment (which might be after
having already taken a PAYG option at the pre-arrears stage) but also subsequent
occasions they miss a payment, for example if they fall behind under a forbearance
option put in place to deal with earlier arrears. Such an approach would be part of a
firm meeting its obligations under CONC 7.3.4R and 7.2.1R(1).
2.12 Firms may choose to automate all or part of the process for accessing PAYG options.
In doing so, they should ensure that the digital journey has processes to identify
borrowers in default or arrears difficulties and ensure that there is a mechanism for
these borrowers to request a bespoke conversation or engagement with the firm so it
can offer appropriate forbearance and support. This will help firms to demonstrate
that they have treated customers with due consideration – a key part of CONC
7.3.4R – and allow them to act promptly and efficiently to address the customer’s
situation.
2.13 As well as identifying customers facing difficulty repaying their BBLS loans, these
processes should also try to identify any wider financial difficulties those borrowers
may have, particularly where the lender holds little background information about
them.
2.14 Firms may need to use filtering, or triaging, whereby customers are asked questions
about their financial situation, to identify customers who need a bespoke
conversation or engagement with the lender. Where, through filtering questions or
other engagement, the firm becomes aware that the customer may need additional
forbearance, they should advise the customer that additional support may be
available to them.
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2.15 Appropriate filtering, the provision of appropriate bespoke discussions, and offers of
additional forbearance when needed, will help firms to demonstrate that customers
have been given due consideration, and have been treated fairly. Discussions with
borrowers about financial difficulties are likely to require firms to investigate the
borrower’s overall circumstances and should not be restricted to only discussing the
BBLS loan.
2.16 Where a customer requests a PAYG option but does not indicate that they might
need additional support, or, if they are offered additional support, does not wish to
avail themselves of it, then the lender can provide the PAYG option without needing
to consider the customer’s particular circumstances and should make the changes to
the repayment terms promptly.
2.17 Obligations under CONC 7 will continue to apply. If firms become aware that
customers are likely to need forbearance additional to a PAYG option, as we outline
in 2.11, they should contact the customer and advise them that additional support
may be available to them. In these circumstances, firms should not limit the type of
forbearance they can provide to PAYG options only, but should have regard to the
requirements in CONC 7.
2.18 The most likely scenario where further support would need to be offered is when a
PAYG option is in place but payments are missed. Firms in this situation should
contact customers who default or fall into arrears, to determine whether they are in
financial difficulty and whether they require additional support. This will be part of
how firms can demonstrate the provision of due consideration to customers in default
or arrears difficulties.
Helping customers make informed choices before selecting
PAYG
2.19 We know that for many customers, PAYG options will provide the appropriate
forbearance they need.
2.20 Helping customers to make informed choices when selecting PAYG options is one
part of demonstrating that firms have treated customers with due consideration. It
may also help firms to demonstrate that they have treated their customers fairly.
Notwithstanding the delivery channel that the lender is using to offer PAYG, firms
should inform customers of any changes in monthly payments and changes to the
total cost of the loan that will result from using the PAYG options. They should
personalise this to illustrate changes to customers’ monthly payments and total
amount to repay. If personalised information is not available as part of any online
process, firms should clearly direct customers to how and when such information will
be made available (such as by directing the customer to a repayment calculator).
2.21 For customers who would like more information about an option, are uncertain as to
which option might be most suitable for them, or consider they may require
additional support, any online or automated journey should make it possible for them
to have an interactive engagement with their lender to discuss their options. Firms
should also clearly communicate to customers in financial difficulties that additional
support may be available to them.
2.22 Any digital or automated process should also highlight to customers how debt advice
support can be obtained. Where considered appropriate, firms engaging with
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customers who are concerned about their financial position should refer customers
for debt advice support, as covered in Chapter 4 of this guidance.
Ability to opt out of automated journeys
2.23 Firms should keep in mind that there will be customers who, due to their complex
financial situation, vulnerability, or personal choice, will need to have an interactive
conversation or engagement with their lender to help them make an informed
choice, before selecting a PAYG option.
2.24 Where firms are automating the process, providing clear opt out options for
customers to use will help firms to demonstrate they have treated their customers
fairly and with due consideration. Opt outs should be available for customers who
decide that they do not want to continue with the automated process or some
aspects of it at a particular time, or they wish to have additional support by
communicating with a member of the firm’s staff.
2.25 Although some firms operate primarily through automated digital channels, some
customers may not wish to engage with some aspects of the automated digital
journey, particularly when they are in financial difficulties or are vulnerable. So, firms
should consider how they can provide support through non-automated channels.
Provision of repayment plans
2.26 As discussed in paragraph 2.5 while lenders can use PAYG options to provide
appropriate forbearance and support for many customers, for some customers they
may not be sufficient without additional support. So, customers, and those assisting
them, may approach firms asking them to consider alternative repayment proposals.
2.27 Debt counsellors or another person acting on the customer’s behalf, should be able
to request PAYG options and other options for the customer. They may also help the
customer to develop an alternative repayment plan or another reasonable proposal
for repaying the debt.
2.28 We remind firms that they must not operate a policy of refusing to negotiate with a
customer who is developing a repayment plan (CONC 7.3.9R) and that they should
allow customers reasonable time and opportunity to repay the debt (CONC 7.3.6G).
Firms must suspend recovery action for a reasonable period where they have been
told that a repayment plan is being developed (CONC 7.3.11R).
2.29 We also remind firms that they must not pressurise a customer to repay a debt
within an unreasonably short period of time or in unreasonably large amounts (CONC
7.3.10R). Firms should ensure that any formal demand for the full outstanding
balance also encourages borrowers to get in touch with the firm to discuss a
repayment plan.
Effective oversight of third-party debt collection agents
2.30 We remind lenders that where they use a third-party debt collection firm to collect
payments under BBLS loan on their behalf, they should comply with our rules and
guidance on outsourcing in SYSC 8.1, as well as CONC 1.2.2(2) and 7.12.3G(1) and
other provisions as appropriate. They should also oversee the conduct of these third
parties as set out in CONC 7.13.8G to 7.13.13R.
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3 Support for vulnerable customers
3.1 For the purposes of this chapter, ‘customers’ refers to customers who are in default
or arrears difficulties.
3.2 Our expectation is that firms will embed the fair treatment of vulnerable consumers
into their culture, policies and processes. This expectation is the same whatever the
choice of delivery channel used. Firms should understand the impact of vulnerability
on the needs of their borrowers and how this may affect borrowers’ individual
experiences and outcomes.
3.3 Customers in financial difficulties may have characteristics of vulnerability,
particularly low financial resilience. However, not all customers in default or arrears
difficulties will be vulnerable, while some customers with characteristics of
vulnerability will be at greater risk of harm than others.
3.4 Firms should take particular care to ensure they respond to the needs of customers
at the greatest risk of harm. Firms could take a risk-based approach to developing
their processes which recognises that some customers or groups of customers will
require more support than others. Doing so is in line with CONC 7.2.1R(2) which
provides that a firm must establish and implement clear, effective and appropriate
policies and procedures for customers who the firm understands or reasonably
suspects to be particularly vulnerable customers and to deal with such customers
appropriately.
3.5 To understand and respond to the needs of vulnerable customers, firms are
encouraged to consider the following factors when developing their policies and
procedures for the BBLS loan product:
• How to identify vulnerable customer needs and the ease with which customers
can disclose their needs. In some cases, customers may not recognise they are in
vulnerable circumstances or may be reluctant to disclose their circumstances.
• How to provide communication channels that best meet customer needs.
• How to use communication channels, including digital channels, to proactively tell
vulnerable customers about the support available to them.
3.6 Firms will need to comply with their obligations under the Equality Act 2010 including
those customers with protected characteristics. In Northern Ireland, where the
Equality Act 2010 does not generally apply, firms should ensure that they comply
with any applicable legislation and FCA rules and guidance.
3.7 Firms may want to have regard to the principles outlined in the Money Advice Liaison
Group (MALG) Guidelines ‘Good Practice Awareness Guidelines for Customers with
Mental Health Problems and Debt’. Firms should also have regard to the Debt Respite
Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England
and Wales) Regulations 2020 (the Breathing Space Regulations) which will provide
protection from creditor action for a borrower for the duration of any mental health
crisis. These regulations are expected to come into force in May 2021. The
regulations will also provide protection for a borrower for the duration of any mental
health crisis treatment.
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4 Referring customers for debt advice
support
4.1 Customers who are in default or arrears difficulties may benefit from help to manage
their credit payments, including BBLS repayments, or their business finances more
generally.
4.2 Our guidance in CONC 7.3.7AG provides that if a customer is in default or arrears
difficulties, a firm should where appropriate, tell the customer that free and impartial
debt advice is available from not-for-profit debt advice bodies and refer the customer
to one.
4.3 Firms should try to make such referrals as effective as possible, and should consider:
• encouraging customers to use digital tools, where appropriate
• offering to transfer a customer’s call directly to a debt advice provider or
providing the ability for the customer to access debt advice providers directly
from the lender’s own website, mobile phone app, or other channel that is being
used by the customer
• whether the customer would benefit from a specialist source of debt advice –
which may well be the case for a self-employed person, or a person running a
business
• the debt advice referral strategies highlighted in the Money Advice Service
‘Strategic toolkit for creditors’ – when dealing with non-corporate borrowers
4.4 Firms should tell customers that they can get not-for-profit debt advice and guidance
through both digital and telephone services. We would expect signposting and
referral processes to take the full range of delivery channels into account. Firms
should also highlight the availability of face-to-face services, where this is
appropriate, but should help the customer, in line with the paragraph above, to get
debt advice through alternative means if face-to-face services are not available.
4.5 Where firms handle customers through a digital or scripted process, we expect this
to include appropriate signposting or referrals to debt advice or money guidance, as
appropriate to the customer’s needs.
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5 Lending Standards Board’s (LSB)
Standards of Lending Practice for business
customers
5.1 The LSB is a self-regulatory body providing independent oversight of its registered
firms’ adherence to voluntary standards, with sanctions for material breaches.
5.2 Where CONC 7 does not apply to debt collection under BBLS, firms should, where
required, take account of how the LSB Standards of Lending practice for business
customers apply.
5.3 The FCA has recognised the LSB Standards of Lending practice for business
customers as being a code of conduct, which sets proper standards of market
conduct for regulated firms undertaking unregulated activities within financial
markets.
5.4 The LSB Standards outline the way firms are expected to deal with their customers
throughout the entire product life cycle. This includes expectations about the
treatment of customers approaching – and in – financial difficulty, together with
customers in vulnerable circumstances.
5.5 Our Handbook explains that, in the context of unregulated activities, behaviour that
is in line with an FCA-recognised industry code will tend to indicate compliance with
rules that reference ‘proper standards of market conduct’ – see the Decision
Procedure and Penalties Manual (DEPP) 6.2.1G(4A). So, for example, following a
recognised code will be one of the ways for a person to establish that they have
observed proper standards of market conduct for unregulated activities for the
purpose of our Code of Conduct Sourcebook (COCON) 2.1.5R.
