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Lending In 2021: How To Give Customers Breathing Space

Thursday, 9 September 2021

Now is the time to support and protect consumers, whilst continuing to lend responsibly. Martin Kisby - Director of Compliance at Equiniti Credit Services - shows us how and why.

Part of our 'Without Boundaries' regulation series.

How can lenders survive and help others? What’s the new normal for financial services? What is ‘Breathing Space’? 

Martin1 Martin Kisby, Head of Compliance, EQ Credit Services

Not questions asked five years ago. But times have changed. In the age of good governance, and in the context of the global pandemic, everyone in the financial services industry seems to be finding a greater sense of purpose. So what can lenders do to support consumers whilst lending responsibly?

To answer these questions, we look at the current ‘new normal’ and give a quick guide to short and longer term actions.

What’s our ‘new normal’?

Fast-paced technology change, for good

2020 was a year of challenges and opportunities for business, a year of reassessing how we work and looking for new ways to survive and shape the future. As a result of the changing financial environment, government and regulators rightly took proactive action to support consumers and businesses.

As the situation continues throughout 2021, we need to consider our ongoing response to the situation and work out how we can help. We need to take advantage of the huge development and innovation happening in technology. We can ensure that we have fail-safe processes and procedures to support and protect these consumers, whilst continuing to lend responsibly.

Payment holidays, redundancies and the long tail of debt

Payment holidays, across the majority of consumer credit lending products, have been available and extended over many months. The number of consumers likely to be affected long term, could be significant. Added to that, many have lost their jobs.

Despite a slight uptick in employment in the last quarter, UK furlough will end soon so we may see unemployment figures increase. In sum, this could have a significant impact on consumers' abilities to meet contractual requirements. This equates to a high volume of vulnerability, particularly for those with an even longer tail of debt. We need to continue thinking about how we can help these individuals.

Give customers breathing space

The debt respite service (Breathing Space) mandates that regulated businesses should provide consumers who indicate they are in financial distress with 60 days of breathing space. notes: “The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.”

Breathing Space came into effect in May 2021. It’s too soon to understand the volume of consumers making use of this hold period. It is likely to be higher than we anticipated. If not yet, lenders need to be working in accordance with this initiative.

What can we achieve, and how?


Firms need to ensure that they can meet the needs of the consumers who take payment holidays or make use of the 60 day breathing space. Companies should be pro-actively reaching out to the consumers on payment holidays to understand their ongoing circumstances. They need to ask: Can changes be made to their current agreement? Can payments be reduced? Is a further payment holiday required?

Vulnerability processes and procedures need to be improved to ensure that companies can manage the likely increase in volume. Specific teams could become the norm with specialist agents trained to manage these consumers.


Analysis of current underwriting principles is needed, the demographic of the customer is likely to change significantly, and firms will need to adapt to meet this change. The use of Open Banking could provide companies with a real-time view of a customer’s financial circumstances, allowing a bespoke approach to decision making, rather than a one-size-fits-all approach.

System enhancements could be reviewed to understand whether regular payment holidays (similar to some mortgages) could be offered to allow more flexibility. Organisations need to build in the capacity to care for consumer needs at scale.


New and innovative products could come to the forefront. They may build in payment deferrals as standard. The use of initiatives, like open banking or open finance, will help lenders to have a full and detailed picture of the consumers. Much like the medium term solutions, a major consideration is how to care at scale.

It's safe to say that the future of consumer credit is uncertain, the disruption to the market is likely to be significant, and lenders are going to have to adapt quickly to ensure that they are able to continue to provide affordable and suitable lending to consumers. Firms which are able to adapt are the firms who are going to be successful and continue to trade in the period of uncertainty.

This is all within the context of the ongoing pandemic. The current times present the perfect opportunity to improve the ability to lend responsibility. With good purpose, we can benefit consumers and make a difference to the lives of many.

EQ are: Purposeful. Regulated. Experts.

This article is part of the 'Without Boundaries' series.

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