Lenders to pay out £47m to financially struggling borrowers
Summary
Following an investigation into how lenders treat borrowers who are experiencing financial difficulties, the FCA said it has secured up to £47m from lenders for more than 195,000 customers.
Among the issues identified were: not tailoring support adequately to individuals’ circumstances, failing to respond appropriately to customers with characteristics of vulnerability, and not engaging effectively with customers in terms of money guidance and debt advice.
Along with securing £47m worth of redress from 17 of close-to-100 lenders investigated, the FCA has proposed a permanent requirement for lenders to support borrowers in difficulty. This would include providing the right support to customers struggling to make repayments, ensuring that repayment arrangements are appropriate, and that customers are signposted to free and impartial money guidance and debt advice.
It has also been suggested that lenders should not charge consumer credit customers arrears fees over and above what they reasonably need to cover their costs, and that lenders should consider the overall impact of support arrangements on mortgage balances.
FCA executive director of consumers and competition Sheldon Mills said ‘Many firms have been following our temporary guidance, developed during the pandemic, to support borrowers in tough times. Our proposals will help ensure this continues. Where we see firms not providing the right support, we will act quickly to put this right. If you’re worried about keeping up with payments, we encourage you to talk to your lender as soon as possible.”
The regulator has launched a consultation on these proposals, which is open until 13 July. The FCA expects its new rules will come into force in the first half of 2024.