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CONC 7.3 Treatment of customers in default or arrears (including repossessions): lenders, owners and debt collectors

  1. (1)

    In relation to debt collecting and debt administration, the definition of customer refers to an individual from whom the payment of a debt is sought; this would include where a firm mistakenly treats an individual as the borrower under an agreement and mistakenly or wrongly pursues the individual for a debt.

    [Note: paragraph 1.12 of DCG]

  2. (2)

    In relation to debt collecting and debt administration, the definitions of customer and borrower are given extended meanings to include, as well as those other people they generally include, a person1 providing a guarantee or indemnity under a credit agreement and also a person1 to whom rights and duties under the agreement are passed by assignment or operation of law. This reflects article 39M of the Regulated Activities Order.


Dealing fairly with customers in arrears or default


When dealing with customers in default or in arrears difficulties a firm should pay due regard to its obligations under Principle 6 (Customers’ interests) to treat its customers fairly.

[Note: paragraphs 7.12 of ILG and 2.2 of DCG]

Forbearance and due consideration


Where a customer under a regulated credit agreement fails to make an occasional payment when it becomes due, a firm should, in accordance with Principle 6, allow for such unmade payments to be made within the original term of the agreement unless:

  1. (1)

    the firm reasonably believes that it is appropriate to allow a longer period for repayment and has no reason to believe that doing so will increase the total amount payable to be unsustainable or otherwise cause a customer to be in financial difficulties; or

    [Note: paragraph 4.7 of ILG]

  2. (2)

    the firm reasonably believes that terminating the agreement will mitigate such adverse consequences for the customer and before terminating the agreement it explains this to the customer.


A firm must treat customers in default or in arrears difficulties with forbearance and due consideration.

[Note: paragraphs 7.3 and 7.4 of ILG and 2.2 of DCG]


Examples of treating a customer with forbearance would include the firm doing one or more of the following, as may be relevant in the circumstances:

  1. (1)

    considering suspending, reducing, waiving or cancelling any further interest or charges (for example, when a customer provides evidence of financial difficulties and is unable to meet repayments as they fall due or is only able to make token repayments, where in either case the level of debt would continue to rise if interest and charges continue to be applied);

    [Note: paragraph 7.4 (box) of ILG]

  2. (2)

    allowing deferment of payment of arrears:

    1. (a)

      where immediate payment of arrears may increase the customer's repayments to an unsustainable level; or

    2. (b)

      provided that doing so does not make the term for the repayments unreasonably excessive;

  3. (3)

    accepting token payments for a reasonable period of time in order to allow a customer to recover from an unexpected income shock, from a customer who demonstrates that meeting the customer's existing debts would mean not being able to meet the customer's priority debts or other essential living expenses (such as in relation to a mortgage, rent, council tax, food bills and utility bills).


Where a customer is in default or in arrears difficulties, a firm should allow the customer reasonable time and opportunity to repay the debt.

[Note: paragraph 2.2 of DCG]

CONC 7.3.7G


  1. (1)

    3If a customer is in default or in arrears difficulties, the firm should, where appropriate:

    1. (a)

      inform the customer that free and impartial debt advice is available from not-for-profit debt advice bodies; and

    2. (b)

      refer the customer to a not-for-profit debt advice body.

  2. (2)

    A firm may refer the customer to a not-for-profit debt advice body by, for example, providing the customer with a copy of the current arrears information sheet under section 86 of the CCA, or with the name and contact details of a not-for-profit debt advice body or the Money Advice Service; or directly transferring the customer’s call to a not-for-profit debt advice body.

  3. (3)

    In addition, the firm may provide the customer with the name and contact details of another authorised person who has permission for debt counselling, provided that to do so is consistent with the firm’s obligations under the regulatory system.


An example of where a firm is likely to contravene Principle 6 and CONC 7.3.4 R is where the firm does not allow for alternative, affordable payment amounts to repay the debt due in full, where the customer is in default or arrears difficulties and the customer makes a reasonable proposal for repaying the debt or a debt counsellor or another person acting on the customer's behalf makes such a proposal.

[Note: paragraphs 7.16 of ILG and 3.7j of DCG]


A firm must not operate a policy of refusing to negotiate with a customer who is developing a repayment plan.

[Note: paragraph 3.9d (box) of DCG]

CONC 7.3.10RRP

A firm must not pressurise a customer:

  1. (1)

    to pay a debt in one single or very few repayments or in unreasonably large amounts, when to do so would have an adverse impact on the customer's financial circumstances;

    [Note: paragraph 7.18 of ILG]

  2. (2)

    to pay a debt within an unreasonably short period of time; or

    [Note: paragraphs 3.7i of DCG and 7.18 of ILG]

  3. (3)

    to raise funds to repay the debt by selling their property, borrowing money or increasing existing borrowing.

    [Note: paragraph 3.7b of DCG]

CONC 7.3.11RRP

A firm must suspend the active pursuit of recovery of a debt from a customer for a reasonable period where the customer informs the firm that a debt counsellor or another person acting on the customer's behalf or the customer is developing a repayment plan.

[Note: paragraphs 7.12 of ILG and 3.7m of DCG]

CONC 7.3.12GRP

A “reasonable period” in CONC 7.3.11 R should generally be for thirty days where there is evidence of a genuine intention to develop a plan and the firm should consider extending the period for a further thirty days where there is reasonable evidence demonstrating progress to agreeing a plan.

[Note: paragraphs 7.12 (box) ILG and 3.7m of DCG

CONC 7.3.13GRP

A firm seeking to recover debts should have regard, where appropriate, to the provisions in the Common Financial Statement or equivalent guidance.

[Note: paragraphs 7.16 (box) of ILG and 3.7k of DCG]


CONC 7.3.14RRP
  1. (1)

    A firm must not take disproportionate action against a customer in arrears or default.

    [Note: paragraphs 7.14 (box) of ILG and 3.7t of DCG]

  2. (2)

    In accordance with (1) a firm must not, in particular, apply to court for an order for sale or submit a bankruptcy petition, without first having fully explored any more proportionate options.

    [Note: paragraph 7.14 (box) of ILG]

CONC 7.3.15GRP

A firm should not make undue, excessive or otherwise unfair use of statutory demands (within the meaning of section 268 of the Insolvency Act 1986) when seeking to recover a debt from a customer.

[Note: paragraphs 7.10 of ILG and 3.7n of DCG]

Enforcement of debts

CONC 7.3.16GRP

A firm should not take steps to enforce a debt if it is aware that the customer is subject to a bankruptcy order (or in Scotland where sequestration is awarded in relation to the customer), a debt relief order or an individual voluntary arrangement (or, in Scotland, a protected trust deed or a Debt Arrangement Scheme).

[Note: paragraph 3.9h of DCG]

CONC 7.3.17RRP

A firm must not take steps to repossess a customer's home other than as a last resort, having explored all other possible options.

[Note: paragraphs 7.14 of ILG, 3.7t of DCG and 6.3 of SCLG]

CONC 7.3.18RRP

A firm must not threaten to commence court action, including an application for a charging order or (in Scotland) an inhibition or an order for sale, in order to pressurise a customer in default or arrears difficulties to pay more than they can reasonably afford.

[Note: paragraphs 7.14 of ILG and 3.7i (box) of DCG]

CONC 7.3.19GRP

Firms seeking to recover debts under regulated credit agreements secured by second or subsequent charges in England and Wales should have regard to the requirements of the relevant pre-action protocol (PAP) issued by the Civil Justice Council. The aims of the PAP are to ensure that a firm and a customer act fairly and reasonably with each other in resolving any matter concerning arrears, and to encourage more pre-action contact in an effort to seek agreement between the parties on alternatives to repossession. The Pre-action Protocol on Possession Proceedings applies to all mortgage repossession cases in Northern Ireland. The Home Owner and Debtor Protection (Scotland) Act 2010 provides for pre-action requirements to be placed on secured lenders in Scotland.

[Note: paragraphs 7.14 of ILG and 3.7s of DCG]