New research from the Financial Conduct Authority (FCA) has found that while many are struggling to meet financial commitments with 7.4 million people were struggling to pay bills and credit repayments in January 2024, down from 10.9 million in January 2023. This is still higher than the 5.8 million recorded in February 2020, before the cost of living squeeze began.
The research found that 5.5 million people said they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous 6 months from January 2024. This was down from 6.6 million people a year earlier.
In the 12 months to January 2024, 2.7 million adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty. Nearly half (47%) of those that sought help said they were in a better position as a result. However, two in five adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.
Renters, single adults with children, adults from a minority ethnic background and people living in the north-east of England were more likely to be in financial difficulty.
The figures show that 14.6 million people (28%) aren’t coping financially or are finding it difficult to cope. This is down from 36% a year earlier.
The number of strugglers rises to 60% among those with a household income under £15,000, 55% among unemployed households, 50% among renting households and 55% among single parents.
Sheldon Mills, Executive Director of Consumers and Competition said “Our research shows many people are still struggling with their bills, though it is encouraging to see some benefitting from the help that’s available.
“If you’re worried about keeping up with payments, reach out to your lender straight away. They have a range of support options and will work with you to agree the best one for you. You can also find free debt advice through MoneyHelper.”
The FCA has reminded financial firms they must support their customers and work with them to manage payment difficulties. The regulator has cracked down where firms haven’t met its expectations, securing nearly £60 million in compensation for 270,000 customers.
The FCA has also confirmed stronger protections for borrowers. It is making permanent the expectations on lenders to support borrowers in difficulty, which were introduced during the pandemic, with additional targeted changes designed to improve outcomes for consumers.
Commenting on the data Conor D’Arcy, Interim Chief Executive of the Money and Mental Health Policy Institute, said “It’s encouraging that the number of people struggling with bills has dipped. But with millions of us still behind on key payments, the impact of the cost of living crisis on our finances and mental health is likely to last a long time.
“Against that backdrop, it’s concerning to see that while 7.4 million people are struggling with bills and repayments, roughly a third of that number have got in touch with their lender or sought other help.”
“That shows that there’s more for lenders to do. That includes reaching out to customers with support before people seek it, so that those of us trapped in a fog of stress and anxiety know what help is out there. When customers do get in touch, the offer from firms needs to be compassionate and practical. Roughly half of people who contacted their lender felt they were in a better position as a result, but that indicates there’s still some way to go to make sure anyone in financial difficulty can get the help they need.”
“The pressure of price rises may have eased, but with millions of us missing payments, it’s absolutely critical that firms consider how they are communicating with customers. That includes reviewing how many times they contact people in debt, given how many people tell us how they’ve felt bombarded and harassed by the frequency of contact. This is really important in limiting the distress that the cost of living continues to cause.”
Richard Lane, Chief Client Officer at StepChange, said “While overall pressures on households have eased slightly in the last 12 months the number of people struggling remains much higher than pre-pandemic. It’s important that lenders remain vigilant to those who are still at risk of financial hardship, so we’re pleased to see the FCA raising expectations of the steps firms must take to identify and support customers in difficulty. In 2023, average unsecured debt among StepChange clients reached its highest level for a decade, while the charity saw a 10% rise in people seeking help with problem debt.
“While some people’s financial position may have marginally improved, the cost of living crisis has left others in difficult circumstances, with those on lower incomes particularly struggling to repay significant household debt and relying on credit to keep up. Research has shown that people in financial difficulty are often struggling with anxiety, embarrassment and stigma and tend to try and juggle their finances and cope for too long before seeking help, when they could benefit from lender support and free debt advice sooner.
“As we approach one year since the FCA introduced the new Consumer Duty, it’s essential that firms focus their efforts on reducing customer harm by spotting signs of financial difficulties early. Offering tangible help and referring to debt advice at an early stage could make a real difference to consumer outcomes.”
Lauren Peel, Director of Consumer Insights at Fair4All Finance, said “The latest findings from the Financial Conduct Authority (FCA) are a stark reminder of the financial struggles that continue to be a reality for millions of households. Households have been under a lot of pressure with higher bills over the last two years, with many likely to have just been hit with annual rises in their council tax and utility bills that come into effect in April. For many, this will only compound their debt problems.
“Getting out of the spiral of debt can be really tough and it is important that people don’t feel that they have to turn to areas such as loan sharks or illegal money lenders, in the hope of a solution. Community finance providers, such as credit unions, are playing a vital role in helping tackle everyday bills and building modest saving habits, as well as signposting other support such as debt advice or reviewing tariffs to ensure that people are on the cheapest ones.
“Our own research* shows nearly two in three people feel they are struggling with debt, yet 82% of the population keep their money worries to themselves. As millions continue to feel the strain of cost-of-living pressures, it is simply not sustainable to have a situation where an overwhelming number of people are not opening up about their financial difficulties.”
Sarah Coles, Head of Personal Finance, Hargreaves Lansdown said “The cost-of-living crisis is easing for millions of people, but for millions more, inflation still has an iron grip on their finances. If you’re wrestling with impossible bills, it’s vital to get the help you need. If you’re finding life slightly easier, this is the time to rebuild.
“A worrying number of people are still facing horrible challenges. Some 7.4 million people (14%) still feel their bills and credit repayments are a heavy burden, 5.5 million (11%) have missed at least one bill in the past six months, and 5.9 million (11%) have no disposable income. All of these figures are down from last year, but it still means a horrible struggle for an awful lot of people. People in this group include huge numbers of those on lower incomes, unemployed households, renters and single parents.”
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