In times of financial difficulty it can be hard to know where to turn for help and what to do to rectify the situation.

Banks understand that you can face unexpected changes in your circumstances, for example if you become ill or lose your job. These situations can upset your financial plans and your ability to pay back any money you have borrowed.

You may find yourself in financial difficulties if your lifestyle changes and your disposable income (the difference between your income and essential spending) falls, due to circumstances such as:

  • loss of employment
  • disability
  • serious illness
  • relationship breakdown
  • death of a partner
  • parental/carer leave
  • starting a lower paid job
  • imprisonment

What can I do if I think I am getting into financial difficulties?

The more open and honest you are about the problem and its causes, the more your bank will be able to help you. This includes being honest with yourself – don’t ignore post from people you owe money to.

If you do find yourself in difficulties, let your bank know as soon as you can. For example, when you know that your circumstances are going to change, get in touch with your bank. Banks will not usually be aware that your circumstances have changed until you tell them – and they will try to assist you if you are facing financial difficulties. They may put you in touch with another team within the bank that specialises in this area. Debt problems are easier to solve if you act early and ask for help.

You will need to work out a realistic budget and, if you haven’t already done so, consider whether there are any ways of increasing your income or cutting back on non-essential spending. Different things will be important to different people. You could consider selling assets to reduce debts and help with repayments. You should also make sure that you are getting all the benefits you are entitled to. A specialist money adviser can help.

Show your budget to your bank and try to agree a course of action with them. This might involve rescheduling repayments until you get back on your feet. Again, a specialist money adviser can help with this.

If you are using a money advice service, tell the bank so that they can allow you time to have discussions with them.

How do banks deal with customers who are in financial difficulty?

If you are in genuine financial difficulty, it is in the bank’s interest – as well as your’s – to find a solution.

The Lending Code says that banks will deal with people who are in financial difficulty sympathetically and positively, and that their first step will be to try to contact you. You can read more about the Lending Code on the BBA website here.

Different banks have different procedures. Generally, a bank will want to do the following:

  • Contact you if they think or become aware that you may be heading towards financial difficulties.
  • Explain their approach to financial difficulties: i.e. that they will deal with you sympathetically and positively.
  • Provide you with information on sources of free, independent money advice.
  • Discuss the matter with you. They are looking for information that will help them to identify the best course of action.
  • Keep in touch. If you want them to deal with you in writing, by fax or over the phone, they will be happy to do so..
  • Give you clear information about the amount you owe.
  • Develop a plan with you for clearing your debts in a way you can afford, with your help and co-operation. Such a plan may range from an informal arrangement to restructuring your debt so you can repay it over an extended period. They will give you written confirmation of what is agreed.
  • Tell you beforehand about any action they may take, such as explaining any charges you may have to pay.

How can my bank help me?

Banks will be sympathetic and positive when they consider any financial difficulties you may have. Their first step will be to try and contact you to discuss the matter. If you find yourself in financial difficulties, you should let them know as soon as possible. The sooner you discuss your problems, the easier it may be to find a solution. The more you tell them about your financial circumstances, the more they may be able to help.

They will do all they can to help you overcome your difficulties. With your co-operation, they will develop a plan with you for dealing with your financial difficulties and they will confirm with you in writing what has been agreed.

Banks will try to come to the fairest solution. This will involve working out what assets you have available, working out what you need to repay and going through your income and spending in order to agree a reasonable plan for repaying the debt.

In some cases, this discussion may take place through specialist teams. Their aim is to help you assess your circumstances and agree a repayment programme. This will allow them to continue to provide banking services to you but they may not be able to provide the full range of services. Banks treat each case individually and will not encourage you to commit or agree to a repayment arrangement which, from their knowledge of the situation, it is clear you cannot afford.

The bank can only make a decision about what you can reasonably afford to repay when they have a full picture of your financial circumstances. They may be willing to accept smaller payments, but they do not have to accept any offer of repayment just because an offer has been made.

You will be given every opportunity to agree satisfactory conditions for repaying your debt. If you can make a satisfactory agreement with your bank about repaying your debt, it is important that you keep in touch with the bank throughout the repayment process, especially if your circumstances change. Repayment plans with your bank may be subject to regular review. Any review period will be agreed with you or your adviser. You and/or your advisers should inform the bank if your personal situation changes.

If a satisfactory agreement cannot be reached, or an arrangement is agreed but you do not keep to it, your bank will ask you to make up the payments in full. If you do not do this, the account may be transferred to a specialist debt recovery department and banking services will usually no longer be made available.

Who else can help?

You may want to talk to your family, friends or support agencies who may be able to help. Many people find it helpful to get advice from a specialist debt counsellor (usually called a money adviser).

You can get free, independent money advice from any of the following:

All of these are free, confidential, independent and reliable. Under the Lending Code, banks will work with any of them if you ask them. For confidentiality reasons, they cannot do so without your permission. So, the advice agency will ask you to sign a form giving your bank permission to discuss matters with them. There are other organisations that do not charge consumers for debt advice. Banks will work with an adviser from an organisation not listed above, but they will need your permission to do so.

If you would like further BBA advice on debt, then do take a look at our Dealing with Debt publication here, which goes into further details of the options available to those struggling with debt.

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