The banking sector’s primary self-regulatory body, the Lending Standards Board (LSB), is urging firms to prepare for the financial struggles customers will face this year, as incomes are eaten away by the higher cost of everyday life. 

In its 2023/24 Business Plan released today, the LSB outlines how its areas of focus for the year will include financial resilience and digital journeys, alongside its ongoing work on the prevention of authorised push payment (APP) scams. 

Emma Lovell, chief executive at the LSB, comments: “The cumulative upwards creep of inflation, prices and taxes present a longer-term issue for individuals and businesses. Even at the point that inflation is predicted to be brought under control later in 2023, the cost of everyday life is unlikely to reduce and will likely ‘reset’ to a higher level. 

“We will all, individuals and businesses alike, need to adjust to a new economic climate of higher prices and we are urging bankers and lenders to join us in our renewed focus on preventing customer harm.” 

Supportive digital journeys 

Much of the LSB’s work acknowledges that banks and lenders need to work with customers in a bespoke manner when they are vulnerable or facing financial difficulty. However, this has become more challenging as customers increasingly engage via digital channels. These channels can bring massive benefits in terms of convenience and user experience, but can also make it more difficult to spot vulnerable customers and those entering financial difficulty, and to provide appropriate support. 

In 2023/24 the LSB will undertake a thematic review of this issue across firms registered to the personal and business Standards and the anti-scam Contingent Reimbursement Model (CRM) Code. The review will assess how digitised and data-driven customer interactions are impacting customer outcomes – and where lessons can be drawn for both registered firms and the wider industry. 

Preventing financial difficulty 

Support measures for personal and business customers facing financial distress is an area of emphasis for both the LSB and the financial services industry over the coming year. 

The LSB will be undertaking a significant project cross-cutting both the personal and business Standards that considers the data and metrics available to firms to identify and assess customers at risk of financial difficulty. It will also investigate how firms can use this data proactively to mitigate the risks of financial distress, and to reduce the impact when a customer does fall into difficulty. 

The conclusions will be shared with registered firms to ensure that they are prioritising the protection of customers facing increasing financial distress.

The future of the CRM Code 

The CRM Code is currently the only form of protection for customers which specifically addresses the prevention and detection of, and response to, APP scams. Outcomes for customers have demonstrably improved since the introduction of the Code in 2019 and its oversight by the LSB. 

Yet the LSB recognises that the role and focus of the Code will change as the Payment Systems Regulator (PSR) finalises its rules around compulsory reimbursement over the coming year. The LSB will work closely with the PSR, Pay.UK, firms and stakeholders during this period. 

The LSB believes there should remain an independent standards framework for firms capturing the conduct elements of the CRM Code, even once the PSR has introduced new requirements on reimbursement, to ensure work to prevent scams remains the top priority. 

In 2023/24 the LSB will also conduct roundtables following the development of guiding principles for firms resulting from their recent research work in respect of the effective warnings provisions of the Code; make updates to the Information for Practitioners; and continue to share best practice and insights in relation to the Code. 

Ms Lovell comments: “The prevalence and increasing sophistication of fraud and scams looks set to continue. Cross-sector collaboration beyond the financial services industry and a common understanding of the opportunities available to all sectors to protect individuals from fraud are also key to achieving a reduction in successful scams and avoiding the devastating impact of such crimes on customers.”