Arrears mean required payments have fallen behind; what happens next depends on the agreement, the cause and how the creditor responds.
An account is in arrears when scheduled amounts due under the agreement have not been paid in full. Arrears can lead to fees, collections activity, credit-file reporting and ultimately default, but those consequences are not all automatic or identical.
For FCA-regulated consumer credit, firms must follow conduct rules on customers in or approaching arrears and should provide appropriate support and forbearance where required.
Key points
- Contacting the lender early can widen the available options.
- A temporary arrangement can affect how the account is reported, so get the terms in writing.
- Disputing part of a balance does not automatically erase undisputed arrears.
- Credit-file reporting should reflect the real position rather than punish a customer for making a complaint.
What to check first
Check the contractual due date, amount, payments received and any fees. A surprising arrears balance can be caused by a failed direct debit, payment allocation, backdated charge, interest, reversed payment or an incorrect starting balance. Reconcile the account before agreeing to an amount.
If you cannot afford the contractual payment
For regulated credit, tell the lender about financial difficulty and ask what forbearance or reduced-payment options are available. Do not promise a payment you cannot sustain merely to stop calls. A realistic arrangement is more useful than repeated broken promises.
If the arrears are disputed
Separate the undisputed and disputed parts. Tell the creditor exactly which transactions or charges you challenge and why. Preserve evidence that the balance was disputed before later collection or reporting decisions.
In practice
- Ask for a statement of account if the arrears figure is not transparent.
- Confirm any repayment arrangement in writing, including amount, frequency, duration and how the account will be reported.
- If vulnerability or circumstances affect communication, ask for reasonable support and record what was agreed.
What to do
A practical next-step plan
- Reconcile the account from the last point you agree was correct.
- Tell the creditor promptly if you cannot pay or if the balance is wrong.
- Ask for available support or a sustainable arrangement.
- Get any agreement and credit-reporting treatment in writing.
- Monitor statements and your credit file to ensure the arrangement is recorded consistently.
- Complain if charges, reporting or collections action does not reflect the agreed position.
Common traps
Things that often confuse the issue
- Ignoring correspondence can reduce options.
- Do not assume “payment holiday” means interest or reporting stops; check the terms.
- Do not let a disputed £20 item obscure a much larger undisputed arrears balance.
Evidence worth keeping
Keep a financial-difficulty record.
- Date you first told the lender you were struggling or likely to miss payment.
- Income-and-expenditure information supplied.
- Each payment proposal and the lender’s response.
- Interest, fees and charges applied after notice of difficulty.
- Any vulnerability or communication needs disclosed.
- What the lender said about credit-file reporting.
If the firm will not engage.
Make a formal complaint citing the specific support request and the firm’s response. Debt advice can also help construct a realistic budget and prioritise essential liabilities.
Ask what will be reported to the credit reference agencies.
The FCA’s current arrears rules emphasise clear information about the customer’s position, options and how support may be reflected on the credit file. An arrangement to pay, arrears markers and defaults can have different effects. Do not agree to a plan without understanding the reporting consequence if that matters to you.
If the reporting later becomes inaccurate, challenge the lender as data furnisher and the CRA with the underlying payment/arrangement evidence.
A repayment plan should be based on affordability, not pressure.
CONC prohibits firms from pressuring customers to clear debt in unreasonably large or few instalments where that would adversely affect their finances, and firms must not operate a blanket policy of refusing to negotiate with a customer developing a repayment plan. Priority debts and essential living costs matter.
| If the firm says… | Ask / do |
|---|---|
| “Pay the arrears today.” | Explain what is affordable after priority bills and provide a sustainable proposal. |
| “We cannot freeze interest.” | Ask the firm to explain which forbearance options it considered and why continued charges are appropriate. |
| “Any arrangement will damage your credit file.” | Ask exactly how each support option will be reported before agreeing. |
| “We only speak by phone.” | Ask for key arrangements and consequences in writing so there is a record. |
Tell the lender before the account reaches crisis point if you can.
FCA CONC now expressly treats customers as “approaching arrears” where they indicate that they are at risk of missing repayments. Firms should consider support before default, not only after payments have already failed. Current rules require customers in or approaching arrears or default to be treated with forbearance and due consideration, taking account of individual circumstances.
Practical support can include reduced or token payments, longer repayment arrangements, interest or charge relief, and other sustainable options depending on the product and circumstances.
Official sources
Check the rules behind this guide
- FCA Consumer Credit sourcebook (CONC)
- Debt collecting - Financial Ombudsman Service
- FCA CONC 7: Arrears, default and recovery ↗
These are official or primary sources for this topic. Rules, scheme terms and deadlines can change, so check the live source before relying on a formal time limit or procedure.