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The FCA expects lenders to learn the lessons from examples of good and poor practice seen during the Covid-19 crisis to help borrowers through the cost-of-living squeeze. The FCA said it acted quickly during the pandemic to institute guidance that led to more than five million payment deferrals for mortgage and credit customers, following up with guidance on tailored support.
 
A recent FCA report cited examples of firms delivering good outcomes for customers, but noted that others must do a lot better to support borrowers faced with financial difficulties. It found that just 30% of firms reviewed (15 out of 50) sufficiently explored customers’ specific circumstances, which meant repayment agreements were often unaffordable and unsustainable.

The FCA has already told 32 firms to make changes to improve the way they treat customers. So far, seven of these firms have voluntarily agreed to pay £12m in compensation to nearly 60,000 customers. The FCA will also be looking closely at another 40 firms to ensure they meet its expectations and protect customers from harm.  

FCA executive director of consumers and competition Sheldon Mills said ‘While many firms did well in supporting customers during the pandemic, others failed their customers. Given the current cost of living challenges, it’s vital the sector continues to learn lessons and supports struggling customers. We will restrict or stop firms lending if they fail to treat consumers in financial difficulties fairly.’

The FCA said that firms should:
 
•    encourage consumers to engage earlier when facing financial difficulties
•    offer tailored support, particularly to those with vulnerable characteristics
•    tell people in difficulties about free independent debt advice, when appropriate
•    make sure fees and charges are fair and only reflect reasonable costs incurred
•    consider where it might be appropriate to reduce, waive or cancel fees and charges. 

As pressure on household finances mounts, the FCA expects more customers will need support from lenders. The FCA’s recent Financial Lives survey of 19,000 people showed that more expect to struggle in the months ahead. Nearly eight million people are finding paying for the basics a heavy burden. That’s two and a half million more than in 2020. 

Links: https://www.fca.org.uk/news/press-releases/12-million-compensation-be-paid-thousands-struggling-borrowers

https://www.fca.org.uk/publications/research/borrowers-financial-difficulty-following-coronavirus-pandemic-key-findings