The Financial Difficulty Pathway

Support That Enables

Operating Model

A credit, mortgage, or overdraft product delivers its protective function at the moment a customer cannot pay. Most banks still meet that moment with a collections operation built around recovery, arrears reduction, and enforcement, with default and charge escalation as the terminal options. PS24/2 and the relocated CONC and MCOB rules require firms to offer a structured pathway — forbearance, restructuring, signposting, breathing space — before default. The challenge is to convert collections from a cost-recovery operation into a service designed to keep customers solvent and supported.
The structural move is to redesign the operation as a financial difficulty pathway: defined options anchored in PS24/2 and the embedded CONC and MCOB rules, propagated context so customers do not re-disclose, completed handoffs to free debt advice, and measurement that evidences support — not just cure. Three disciplines:
Defined options, not collector discretion
The pathway specifies the options available to a customer in financial difficulty — payment holiday, term extension, interest reduction, capitalisation, partial-payment arrangement, breathing space, debt advice referral, write-down, hardship grant — and the criteria, in customer-relevant terms, against which each is offered. Eligibility is rule-based and propagated across the customer's product holdings, not collector-discretionary. Where vulnerability is present, the framework defaults to the option range that minimises further detriment, not the option that maximises recovery. PS24/2 made the option range a regulatory expectation across CONC and MCOB. The design test: can the firm demonstrate, across a representative sample of cases, that customers with comparable circumstances received comparable option offers — and that the offers were the PS24/2 range, not the residue of the prior collections playbook?
One disclosure, propagated context
When a customer discloses financial difficulty on one product, channel, or contact, the disclosure propagates to every product the customer holds, every channel they use, and every team that may touch the relationship — collections, customer service, branch, mortgage servicing, fraud, complaints, marketing. The customer does not re-disclose. Cross-sell, retention scripting, and upgrade marketing are suppressed across the relationship, not just on the product where the disclosure was logged. Forbearance applied to one product triggers a review of the others. The FCA borrowers research and the retail banks multi-firm review on vulnerability are explicit that re-disclosure and partial suppression are defining failures of current operating models. The design test: from the customer's account, can the firm evidence that a single disclosure took effect across the relationship — and would that evidence survive challenge from a customer who re-disclosed three times anyway?
Completed handoffs and measured support
Where the pathway includes signposting to free debt advice, breathing space initiation, or referral to specialist support, the firm is responsible for the quality of the handoff — not just its existence. The operating model captures whether the customer reached the destination, what support was received, and what happened on return to the firm's pathway. Measurement is rebuilt around support, not just cure: pathway entry rates relative to early-warning signals; option-offer distribution by vulnerability; complaint themes from customers in difficulty; outcomes for customers exiting breathing space; debt-advice handoff completion rates. Cure rate and arrears reduction remain in the framework but lose their primacy. The design test: does the firm's board pack on customers in difficulty contain measures the customer would recognise as support — or only measures of recovery efficiency?
- Pathway entry is triggered by early-warning indicators (declining balance trends, declined direct debits, essential-spend ratio shifts, gambling-spend signals) as well as by missed payments and self-disclosure — and the proportion entering via early indicators is reported to governance.
- Customers do not re-disclose financial difficulty across products or channels — the firm can evidence, at customer level, that a single disclosure took effect across the relationship, and re-disclosure rates are measured and falling.
- Debt-advice signposting is measured by handoff completion (the customer reached the agency and engaged), not by referral generation alone — and the firm acts on completion-rate gaps as an operating-model issue.
- Option distribution is measured by vulnerability segment, with parity between vulnerable and non-vulnerable customers in comparable circumstances; cure rate and arrears reduction sit alongside support measures in board reporting, not as the primary metrics.
- A high-street bank rebuilt its arrears operation after PS24/2 came into force and the FCA Cost of Living guidance pressed firms to act on early indicators rather than wait for default. The previous operating model had separate collections teams by product (cards, loans, mortgage, overdraft) each running its own scripts, KPIs, and discretionary forbearance decisioning. The redesigned pathway combined three structural moves: one unified case file across the customer's holdings so a disclosure on the credit card propagated to the mortgage and overdraft; rule-based option eligibility (payment holiday, term extension, interest reduction, breathing space, debt advice referral) replacing the previous discretion-led model; and a measurement framework tracking pathway entry against early-warning indicators, option distribution by vulnerability segment, and debt-advice handoff completion. Within nine months the cohort entering the pathway via early-warning indicators had grown from 8% to 41% of in-difficulty customers; the proportion re-disclosing financial circumstances at second contact fell from 67% to 14%; and a debt-advice handoff completion rate of 72% replaced the previous unmeasured leaflet-and-link approach. The board pack now reported pathway-keeping alongside arrears reduction.
- A mortgage lender responded to the relocated MCOB tailored-support rules and the FCA borrowers research by redesigning its forbearance operation around a defined option range with named owners and escalation routes, rather than collector discretion. The previous arrangement had relied on a tiered scripted process where the customer was presented with progressively harsher options as the call escalated — a structure the FCA research had identified as producing different outcomes for customers with comparable circumstances. The redesigned pathway specified six options (payment concession, capitalisation, term extension, interest-only conversion, sale-and-rent-back signposting, breathing space) with eligibility criteria that did not depend on collector judgement, vulnerability triage that defaulted to the broader option range where vulnerability was present, and a structured re-assessment ahead of breathing-space exit so customers did not roll back into the same difficulty. Customer-outcome measurement evidenced that vulnerable customers were receiving the same option distribution as non-vulnerable customers in comparable circumstances — the inverse of the pre-redesign pattern, where vulnerability had correlated with the harsher option set.
Common failure modes
The most common failure mode is rebadging — collections renamed customer assistance, with the same KPIs, the same scripts, and the same terminal options. PS24/2 makes the structural change a binding requirement, not a brand exercise. A second is the partial-pathway problem: forbearance offered on the flagship product (mortgage) while the same customer's credit card, overdraft, and unsecured loan continue on standard collections — the FCA borrowers research identified this as a defining customer experience. A third is the signposting that does not complete: a leaflet or a website link to free debt advice with no warm handoff, no follow-through, and no measurement of whether the customer reached help. PS24/2 places responsibility on the firm for the quality of the handoff, not just its existence. A fourth is cross-sell during difficulty: marketing of additional credit, insurance, or upgrade products to a customer the firm knows is in arrears on another product, because the suppression flag is held in collections systems and not propagated to marketing. A fifth is breathing space treated as a transactional pause rather than as a triggered re-assessment moment — the customer comes off breathing space into the same script that created the difficulty. A sixth is judgement embedded in eligibility: pathway options gated by collector discretion, with vulnerable customers consistently steered to the harsher options.

Related Patterns

The Drawdown Promise

The Claims Promise

Declining with Dignity

The Easy Exit

Evidence & Supporting Facts

PS24/2 (Strengthening Protections for Borrowers in Financial Difficulty, November 2024) replaced the temporary Tailored Support Guidance with permanent rules embedded in CONC and MCOB, requiring firms to offer a structured range of forbearance options and treat financial difficulty as a defined service obligation, not a discretionary collections concession.

FCA borrowers-in-financial-difficulty research (June 2022) documented the lived customer experience: repeated re-disclosure, judgement embedded in collector interactions, signposting that did not complete, and inconsistent option offers between customers with comparable circumstances — the failure modes the operating-model redesign must address.

FCA retail banks treatment of customers in vulnerable circumstances multi-firm review identified that vulnerability disclosure on one product frequently did not propagate to others, that cross-sell suppression was inconsistent, and that vulnerable customers received different outcomes from non-vulnerable customers in comparable financial difficulty — establishing the propagation and option-parity requirements.

FCA Cost of Living guidance (and supporting Dear CEO communications) requires firms to use early-warning indicators to identify customers at risk of financial difficulty and to act before default becomes the only option — anchoring the pathway-entry-by-early-indicator move in regulatory expectation.

AI Automation Lens

Pattern recognition across customer transaction, communication, and arrears data can identify financial difficulty earlier than self-disclosure or first missed payment — the patterns the FCA Cost of Living guidance points to: declining balances, increased gambling spend, rising essential-spend ratios, declined direct debits, switching from credit to cash. Early identification routes the customer into the pathway before default becomes the only option. Natural language processing across collections call recordings and chat transcripts can audit whether scripts deliver the PS24/2 options or default to recovery framing — surfacing the rebadging pattern at the conversation level. Service-design analytics can connect signposting events to debt-advice agency confirmation data, evidencing whether handoffs completed or stopped at the leaflet. Cohort analytics can identify customers receiving forbearance on one product while in standard collections on another, surfacing the partial-pathway gap. For breathing space, automated case management can trigger a structured re-assessment ahead of the breathing-space exit so the customer does not roll back into the same difficulty. The objective is to make the pathway operationally visible — not as MI, but as the route every customer in difficulty actually takes.