What counts as financial hardship?

Financial hardship can result from any circumstances that significantly reduce your ability to meet your financial commitments. Common causes include redundancy or job loss, serious illness or disability, bereavement, relationship breakdown or divorce, reduced working hours, caring responsibilities, and unexpected major expenses. The FCA defines vulnerability broadly and expects firms to consider a wide range of circumstances.

Will a hardship letter stop debt collectors contacting me?

A hardship letter should prompt a regulated creditor to review your account and consider appropriate forbearance measures. Under CONC 7.9, a firm must not pursue the recovery of a debt in a manner that is likely to be oppressive, and must take account of information indicating financial difficulty. If a debt collector continues aggressive contact after receiving a hardship letter, you can complain to the Financial Ombudsman Service.

Should I send hardship letters to all my creditors?

Yes. If you are in financial difficulty and have multiple debts, you should write to all your creditors to explain your situation. This demonstrates that you are acting fairly and in good faith by treating all creditors equally. A debt advice organisation such as StepChange can help you draft letters and negotiate with all your creditors at the same time.

What is the FCA's Consumer Duty?

The FCA's Consumer Duty (PS22/9), which came fully into force on 31 July 2023, requires regulated firms to act to deliver good outcomes for retail customers. It sets a higher standard of consumer protection, with a particular focus on price and value, products and services, consumer understanding, and consumer support. Firms must pay special attention to the needs of vulnerable customers, including those in financial difficulty.

Can I complain if a creditor ignores my hardship letter?

Yes. If a regulated creditor ignores your hardship letter or fails to treat you with forbearance, you can make a formal complaint directly to the firm. If the firm does not resolve your complaint within 8 weeks (or issues a final response you disagree with), you can escalate to the Financial Ombudsman Service (FOS). The FOS can order the firm to take specific action, including writing off the debt in some cases.

Will a hardship arrangement affect my credit file?

Yes, it may. If you enter a reduced payment arrangement, the account may be recorded as in arrears on your credit file. A default may also be registered if you are significantly behind on payments. However, the negative impact of a managed arrangement is typically less severe than an unmanaged default followed by a CCJ. The arrangement will be removed from your credit file six years after the date of default.

Free Financial Hardship Letter Template (UK)

A financial hardship letter is a detailed written explanation of your financial circumstances, sent to a creditor or debt collector to request forbearance, reduced payments, or a temporary hold on.

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Personal Information

Your Full Name*

Your Address*

creditor

Creditor / Organisation Name*

Creditor Address*

debt-details

Account / Reference Number*

Outstanding Balance (£)*

hardship

Hardship Circumstances*

Be specific and detailed. Explain what has happened and how it has affected your finances.

proposal

What Are You Asking For?*

Proposed Arrangement Details*

evidence

I am enclosing supporting evidence

Supporting Evidence Enclosed

execution

Date of Letter*

Document Preview

[debtorName] [debtorAddress] [date] [creditorName] [creditorAddress] Dear Sir or Madam, FINANCIAL HARDSHIP NOTIFICATION — ACCOUNT: [accountReference] I am writing to inform you that I am experiencing serious financial hardship and to request your assistance in managing my account (reference: [accountReference], outstanding balance: [debtAmount]). 1. MY CIRCUMSTANCES I wish to explain the circumstances that have led to my current financial difficulty: [hardshipCircumstances] These circumstances are beyond my control and have significantly reduced my ability to meet my financial commitments, including the payments due on this account. 2. WHAT I AM REQUESTING Given my current situation, I am requesting the following: [proposedArrangement] I believe this is a fair and realistic arrangement given my circumstances. I am committed to meeting my obligations and will review the arrangement as my circumstances improve. 3. REQUEST FOR FORBEARANCE I respectfully ask that you: (a) Treat this letter as a formal notification of financial hardship; (b) Consider my request for [requestedOutcome] sympathetically; (c) Suspend any enforcement action, default notices, or threats of litigation while my request is being considered; (d) Freeze any interest, default charges, or penalty fees on the account; (e) Record my account as being in financial difficulty so that my circumstances are taken into account in any future dealings. 4. SUPPORTING EVIDENCE I enclose the following documents to support my request: [evidenceDescription] I am happy to provide any further documentation you may require. 5. MY RIGHTS I am aware that under FCA rules (CONC 7.3), you are required to treat customers in financial difficulty with forbearance and due consideration. I trust that you will comply with your regulatory obligations in responding to this letter. 6. NEXT STEPS Please confirm your decision in writing within 14 days of receiving this letter. If you require any additional information, please contact me at the address above. I have also sought advice from [StepChange / Citizens Advice / National Debtline] and they are supporting me in managing my debts. Thank you for your understanding. Yours faithfully, ___________________________ [debtorName] Account: [accountReference] Date: [date]

Important Notes

Legal Disclaimer

The Financial Conduct Authority (FCA) requires regulated creditors to treat customers in financial difficulty with forbearance under CONC 7.3 of the Consumer Credit sourcebook. CONC 7.3.4R states that a firm must consider allowing a customer in default or arrears additional time to pay, reducing or waiving interest charges, accepting token payments, and considering whether to write off the debt. The FCA's Consumer Duty (PS22/9) further requires firms to act to deliver good outcomes for retail customers, with a particular focus on vulnerable customers as defined in FG21/1 (Guidance for firms on the fair treatment of vulnerable customers). The Equality Act 2010 also requires creditors to make reasonable adjustments for customers with disabilities. Under the Consumer Credit Act 1974, a debtor who receives a default notice (section 87) has 14 days to remedy the breach before the creditor can take further action. The court has power under section 129 to make a time order, giving the debtor additional time to pay.

This template is provided for informational purposes only and does not constitute legal advice. For complex legal matters, we recommend consulting a qualified solicitor.

Frequently Asked Questions

Related Templates

Debt Write-Off Request Letter Payment Plan Proposal Letter Letter Before Action (LBA)