The UK’s Financial Conduct Authority (FCA) has written to more than 3,500 lenders to remind them of the standards they should meet as consumers across the country are affected by the rising cost of living.
The FCA has been looking into how borrowers in financial difficulty are treated by lenders. It says though it has found examples of lenders providing the right support to their customers, most firms need to have better conversations to fully understand their customers’ individual circumstances, so they can provide appropriate tailored support and ensure arrangements to pay back debt are sustainable.
The FCA has also raised concerns that some customers in vulnerable circumstances are not getting the support they need. It claims some lenders are not discussing the potential benefits of money guidance or free debt advice, or helping and supporting borrowers to access these services.
These concerns were seen broadly across the sector. More serious failings were found at more than 30 firms, largely in the consumer credit sector. The FCA has said it expects these firms to make improvements in how customers are treated.
Lenders have been reminded of their obligations to provide support to struggling borrowers tailored to their specific circumstances and to only charge fees which are fair and that cover the firm’s costs.
In its letter, the FCA is also telling lenders to:
- make sure that their approach to taking on new borrowers takes account of the financial pressure they may face and the impact on their expenditure;
- consider and, if necessary, improve how they treat consumers in vulnerable circumstances;
- effectively direct customers who need it to money guidance or free debt advice.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “Many consumers are feeling the impact of the rising cost of living in their personal finances and we expect this to increase over the next few months. Early action is important for those struggling with debt. We need all firms to get the basics right and provide good quality support. Where we see more serious wrongdoing, we are already acting to ensure these firms improve.
“The financial services industry has a significant role in helping consumers manage their finances – and it should expect us to pay close attention to how they do that over the next few months.”