This happened to be the same day that the Bank of England announced an increase in the base rate, by 0.25%, to 1%. The base rate has not been at 1% since 2009. Only as recently as December 2021 the base rate sat at 0.1%. The past six months have been busy for the Monetary Policy Committee (MPC) of the Bank of England with four rate changes though the books. There is however no sign of things easing off.
The MPC is responsible setting the base rate and decisions on achieving an inflation target, currently 2%. The Minutes of the MPC meeting on 4 May 2022 make for interesting reading. The current rate of inflation is 7% and the MPC anticipate it could rise to 10% by the end of the year (9% in Q2 2022 peaking at 10% by Q4 2022).
The MPC stated that "the majority of that further increase reflects higher household energy prices following the large rise in the Ofgem price cap in April and projected additional large increase in October…The expected rise in CPI inflation also reflects higher food, core goods and services prices."
The MPC also cited issues such as the "significant adverse impact of the sharp rises in global energy and tradable goods prices on most UK households’ real incomes and many UK companies’ profit margins."
With the cost of living at a 30 year high it is not surprising that the FCA used the Building Societies Annual Conference as an opportunity to reiterate their expectations. The FCA told Building Societies that they expect them to:
- Support consumers struggling with personal debt or showing signs of financial difficulty;
- Help consumers obtain advice they need;
- Help consumers avoid falling victims to scams or illegal money lending;
- Encourage borrowers to switch to less costly options, where available;
- Consider how those on fixed rate products can be assisted when rates expire and a sharp hike in prices can be anticipated;
- Engage early with consumers;
- Ensure borrowers are aware that they can get help;
- Train staff to identify and work with vulnerable customers;
- Ensure good outcomes by tailoring forbearance;
- Ensure that fair value is being provided to customers; and
- Help consumers avoid making investments based on misleading or unclear financial promotions.
Whilst this message was conveyed to Building Societies the FCA no doubt expects all financial services firms to take note. All of the items listed are things that firms should be doing on a daily basis as part of complying with the FCA Handbook.
However, if the Covid-19 Payment Deferrals are anything to go by, firms will need to ensure that they prioritise pre-arrears, collections and financial support functions. The volume of consumers getting in touch is set to rise and consumers will be looking for more contact options so that they can operate through their channel of choice. This comes at time with firms are reviewing customer journeys ahead of the Consumer Duty landing.
The only thing that seems to be certain is that the economic situation will continue to change in unexpected ways, and through all of this the FCA expect firms to support consumers and protect them from harm. All a lot easier said than done!
