2024 saw significant challenges in the credit and lending sector. Rising costs, fluctuating interest rates, and economic uncertainties created a complex environment for lenders and borrowers.
As we move into 2025, there is room for cautious optimism. The economy is expected to stabilise, and there is a shift in focus, towards enhancing responsible lending practices and increased support for borrower well-being.

At Scores4All, we are committed to driving these priorities, promoting fairness, proactive credit management, and transparency, and helping consumers and businesses in the industry adapt and thrive.
In this blog, we discuss the significant challenges faced in the credit and lending sector during 2024, including rising living costs, fluctuating interest rates, and regulatory hurdles. At Scores4All, we’re committed to tackling these issues through proactive arrears management, improved credit risk assessment, and enhanced responsible lending practices.
Key Challenges and the impact on borrowers
Rising interest rates and living costs
Throughout 2024, borrowers faced increasing financial strain due to rising interest rates and the continued cost of living crisis. Higher repayment obligations often led to increased arrears and impaired assets, negatively impacting overall credit quality. Borrowers operating on tighter budgets found it increasingly difficult to manage their financial commitments in this challenging environment.
This situation underscores the importance of proactive arrears management strategies for lenders. By closely monitoring borrower behaviours and identifying early signs of financial distress, lenders have an opportunity to intervene and provide support before missed payments occur. Such timely intervention can prevent further deterioration in the borrower’s financial situation.
By identifying early signs of financial distress, lenders can offer timely interventions that prevent minor setbacks from escalating into serious arrears.
Adopting this proactive approach helps borrowers maintain their financial health and benefits lenders by mitigating risks and improving portfolio performance. It is a critical step towards ensuring sustainable credit management and fostering stronger customer relationships.
Limited access to credit for vulnerable borrowers
The regulatory environment, particularly under the CCCFA, presented further challenges by restricting some borrowers' credit access. As a result, many were driven toward high-cost alternatives such as payday loans, which can exacerbate financial difficulties and create cycles of debt that are hard to break.
It is vital to balance regulatory compliance and inclusivity to address these challenges. Lenders that prioritise tailored solutions and offer targeted support for borrowers can foster fairer access to credit without compromising on sound risk management. This balanced approach ensures both regulatory adherence and a commitment to borrower well-being.
Positive developments in 2024 and expectations for 2025
Adjustments to the CCCFA
Recent amendments to the CCCFA have eased certain regulatory constraints without removing the intention of the regulations. This balance ensures that the protective aims of the CCCFA remain intact while addressing practical challenges lenders face. These adjustments have granted lenders greater flexibility in assessing borrower circumstances and making more informed lending decisions. By reducing some of the compliance burdens, lenders are now better equipped to offer credit without overly restrictive hurdles, ensuring that regulatory frameworks remain practical and effective.
These changes have also positively impacted borrower access to credit, particularly for those previously marginalised by rigid requirements. Improved access to credit has created opportunities for more borrowers to achieve financial stability while laying the foundation for more sustainable lending practices in 2025. This shift highlights the importance of an adaptive regulatory approach that considers the needs of both lenders and borrowers.
In addition, clear and transparent communication with borrowers has become a cornerstone of responsible lending. Lenders can foster trust and build stronger relationships by providing straightforward explanations of loan terms, repayment schedules, and financial obligations. This transparency helps borrowers make informed decisions and reinforces their confidence in the lending process, creating a more supportive financial environment.
Responsible lending extends (or ought to) beyond the point at which a loan or line of credit is granted. It encompasses the ongoing relationship between lenders and their customers, ensuring borrowers are supported throughout their financial journey. This includes regular check-ins, offering tailored solutions during financial difficulty, and maintaining open lines of communication. Lenders uphold their responsible lending obligations and build lasting trust by actively engaging with customers and addressing their needs over time.
Signs of economic stabilisation
Toward the end of 2024, inflation began to moderate, and the Official Cash Rate (OCR) showed signs of declining. These developments suggest a more stable economic outlook for 2025, offering much-needed relief to both lenders and borrowers. Economic stabilisation creates a more predictable environment in which lenders can effectively plan and implement supportive strategies.
This period of stability allows lenders to work closely with their customers, offering tailored solutions that address individual financial needs. By prioritising borrower well-being and providing proactive support, lenders can help customers navigate their financial journeys more confidently, fostering long-term financial health and mutual success.
Arrears and liquidations
Consumer arrears continued to climb throughout 2024 as individuals struggled with rising living costs and higher interest rates. For many households, even small changes in financial obligations may have led to significant strain, resulting in missed payments and escalating debts. This trend highlights the importance of lenders proactively identifying and supporting customers at risk of financial hardship.
Similarly, company liquidations increased to a 10-year high during 2024, underscoring the challenges businesses face in a volatile economic climate. Rising operational costs and reduced consumer spending left many companies unable to meet their financial obligations, leading to insolvency. These liquidations disrupt the businesses themselves and have a ripple effect, impacting employees, suppliers, and the broader economy.
Transparent communication builds trust, empowering borrowers to make informed financial decisions.
Going into 2025, the continued fallout from these liquidations poses a significant challenge for lenders. The economic pressures on consumers and businesses reinforce the need for robust credit risk management practices. Lenders must adopt strategies that balance risk mitigation with proactive customer support, ensuring they are well-equipped to navigate the evolving credit landscape while fostering financial resilience across their portfolios.
Responsible lending and transparency as pillars for success
The credit industry faces the ongoing challenge of fostering innovation while safeguarding borrowers’ financial well-being. Achieving this delicate balance hinges on leveraging data-driven strategies to ensure responsible lending and operational efficiency. By using advanced analytics and machine learning, lenders can gain deeper insights into borrower behaviours and financial patterns, enabling them to make more informed decisions that minimise risks and maximise opportunities.
Data-driven approaches allow for the early identification of potential risks, allowing lenders to implement proactive interventions. This means offering support to borrowers before their financial challenges escalate, such as restructuring loan terms or providing tailored repayment plans. Such timely actions help borrowers stay on track and protect lenders from higher arrears and impaired assets, fostering a more resilient credit ecosystem.
Ethical lending practices, including fair treatment and privacy protection, are the cornerstone of long-term success.
At the core of these proactive measures is a customer-centric philosophy. Lenders must place the borrower’s needs and circumstances at the heart of their strategies, ensuring that solutions are tailored to individual financial situations. By doing so, they build stronger, more meaningful relationships with their customers, reinforcing trust and demonstrating a genuine commitment to their financial well-being.
Strong ethical principles must also govern these efforts. Transparent communication, fair treatment, and respect for borrower privacy are essential to responsible lending. Lenders that prioritise these values comply with regulatory expectations and set themselves apart as trustworthy and forward-thinking institutions. By embedding ethics into every aspect of their operations, they create a foundation for sustainable success in the evolving credit landscape.
The path forward: Supporting borrowers in 2025
Proactive engagement
One of the most effective ways to support borrowers is through proactive engagement. By identifying early signs of financial distress, lenders can implement timely interventions, offering tailored solutions that prevent minor financial setbacks from escalating into serious arrears. This helps borrowers regain stability and reduces the likelihood of impaired assets, benefiting lenders’ portfolios.
Scoring solutions represent the gold standard in retail credit risk assessment, providing a sophisticated and data-driven method to evaluate and monitor borrower behaviour. These solutions enable lenders to segment borrowers effectively and prioritise engagement with those who may require immediate support. By employing predictive analytics, lenders can forecast potential risks and take proactive steps, ensuring that interventions are both timely and impactful.
Proactive arrears management benefits both borrowers and lenders, creating a more resilient and inclusive credit ecosystem.
The benefits of such a proactive approach extend beyond individual borrowers and lenders. For borrowers, it fosters financial resilience and emotional well-being, as they feel supported and understood throughout their financial journey. For organisations, it translates to stronger repayment outcomes, enhanced customer loyalty, and a reduced risk of arrears. These factors contribute to a more stable and profitable credit portfolio, positioning lenders as responsible and customer-focused industry leaders.
On a broader scale, proactive engagement and the use of advanced scoring solutions help build a more resilient credit ecosystem. By prioritising borrower well-being and fostering trust, lenders play a critical role in creating a sustainable and inclusive financial environment. This ecosystem benefits consumers and businesses and strengthens the overall economic fabric, ensuring long-term growth and stability for all stakeholders.
Emphasising financial education
Financial education is a cornerstone of responsible lending. Clear communication about loan terms, repayment schedules, and available options empowers borrowers to make informed decisions. By promoting financial literacy, lenders can foster trust and encourage borrowers to take an active role in managing their financial health. Transparent practices strengthen the borrower-lender relationship and contribute to a more resilient financial ecosystem.
Conclusion: a shared responsibility for a better financial future
As we progress through 2025, the credit and lending sector faces both significant challenges and promising opportunities. By prioritising responsible lending, addressing arrears proactively, and maintaining transparency, lenders can build stronger, more sustainable relationships with borrowers. These efforts will drive financial success and contribute to positive social outcomes, fostering a more inclusive and resilient financial landscape. At Scores4All, we are committed to supporting the industry with innovative solutions that reflect our core values of fairness, inclusivity, and long-term growth.
Discover how Scores4All can empower your team to proactively support customers in need. For a confidential discussion on how we can help you make a real difference, reach out today—we’d love to connect.
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