FCA Warns More People Struggle With Money Amid COVID-19

By Irene Madongo
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Law360, London (February 11, 2021, 3:30 PM GMT) -- The financial watchdog said on Thursday that more than a quarter of adults in Britain expect they will struggle to make ends meet, as it reveals the damage the COVID-19 pandemic is doing to people's incomes.

The number of people with low levels of savings or over-indebtedness has increased since the crisis started, according to the Financial Conduct Authority, which has examined how vulnerable consumers are treated by finance companies.

The City regulator has released the findings of a study, which surveyed 16,000 people between August 2019 and February 2020 and another 22,000 in October. The survey focused on how the virus is affecting consumers.

"Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown," Nisha Arora, director of consumer and retail policy at the FCA, said. "The pain is not being shared equally, with a higher-than-average proportion of younger and [black and minority ethnic] adults becoming vulnerable since March."

In October, 25%, or 13.2 million people, said they expected to struggle to make ends meet. Some 30%, or 15.9 million people, expect their household incomes to fall within the next six months, according to the City watchdog.

The number of people with low financial resilience — those with over-indebtedness or erratic or low levels of savings — also rose in 2020, the regulator said. This group has ballooned from 10.7 million to 14.2 million, a jump of almost 33%.

Vulnerability remains a focus for the FCA and it expects to finalize guidance on how finance companies should handle vulnerable customers shortly, Arora added.

"We continue to work with the wider financial services sector, including businesses, regulators and government to support and protect consumers," she said.

The FCA published draft guidance in July 2020 on the way banks, insurers and other finance companies treat vulnerable people, as it called on industry to do more to make sure this group of people enjoy "positive outcomes."

More than 24 million people show at least one potential characteristic of vulnerability, which can include mental health problems or bereavement, the watchdog said at the time.

The regulator has been working with the financial sector to help consumers cope through the pandemic. Banks have announced mortgage breaks for households struggling to pay back their loans, measures that were later extended.

--Additional reporting by Lucia Osborne-Crowley. Editing by Joe Millis.

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