FCA makes lenders pay £12m back to 60,000 as pandemic lessons learnt
The City’s financial watchdog (FCA) is telling lenders to pay back millions in compensation to borrowers after having learnt lessons from poor practices in the pandemic.
A report published by the Financial Conduct Authority this morning outlines that £12m has been paid out to thousands of companies in difficulties.
Its executive director of consumers and competition, Sheldon Mills, said many firms “did well” in helping people during the pandemic but “others sadly failed their customers”.
With inflation above 10 per cent and interest rates set to go up again this week, people are facing the prospect of rising bills and mortgage payments, putting renewed pressure on borrowers.
“’Given the current cost of living challenges, it’s vital that the sector continues to learn lessons to make sure they support struggling customers.”
The FCA said just 30 per cent of companies it reviewed in the report had looked into their customers’ specific circumstances, meaning they were often tied into repayment agreements which were sometimes unaffordable or unsustainable.
The watchdog told at least 32 firms to improve their relationship with borrowers, with seven having agreed to pay back £12m already, voluntarily.
Compensation handed back to borrowers covers 60,000 customers, as the watchdog says it will be looking into a further 40 companies.
In a bid to protect borrowers from harm, the FCA is telling companies to learn lessons from the pandemic about poor practice.
According to its recent Financial Lives survey, almost eight million people are struggling to pay for basic billions, 2.5m more than 2020 in the pandemic.
The watchdog is calling on lenders to engage with customers more, and earlier when they’re in difficulty, giving more tailored support and free advice.
It also called on lenders to ensure their fees are “fair and only reflect the reasonable costs that firms incur” and to consider with it’s appropriate to “reduce, waive or cancel fees and charges.”
Mills said “Given the current cost of living challenges, it’s vital that the sector continues to learn lessons to make sure they support struggling customers.”
“We will take action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly.”