Borrowers due £47m redress as firms come under fire over poor support
Nearly 200,000 borrowers in financial difficulty will receive a share of £47m in redress due to the inadequate support offered by firms.
The Financial Conduct Authority (FCA) has secured £47m in compensation from 17 unnamed financial firms. The money – some of which has already been paid – will be shared by more than 195,000 customers. It is understood that these firms will be in touch directly with borrowers, so customers don’t need to do anything.
During the pandemic, the FCA brought in temporary guidance around how lenders should support borrowers facing financial challenges.
It said it has worked with around 100 lenders on how they treat borrowers facing financial difficulty, and while many have met the standards, others haven’t.
The FCA said some issues identified included not adequately tailoring support to individual circumstance, failing to respond appropriately to customers showing characteristics of vulnerability, and not effectively engaging with customers about money guidance and debt advice.
As such, it is proposing to make the guidance permanent so that firms will be required to help borrowers in difficulty as part of lending rules.
Customers must be signposted to debt advice
The proposals by the FCA are expected to come in during the first half of 2024. They will apply to mortgage, consumer credit, and overdraft providers. The consultation into making these measures permanent is open until 13 July.
Under the plans, firms will be required to help customers who are struggling with repayments by allowing temporary payment holidays or reduced payments where needed, with any repayment arrangements needing to be affordable.
Lenders will also need to signpost customers to free, impartial, money guidance and debt advice services and they will not be able to charge arrears fees that are higher than necessary to recover costs from customers who are in debt.
Mortgage providers will also be required to consider the overall impact on support arrangements.
‘Talk to lenders as soon as possible’
Sheldon Mills, executive director of consumers and competition, said: “Many firms have been following our temporary guidance, developed during the pandemic, to support borrowers in tough times. Our proposals today will help ensure this continues.
“Where we see firms not providing the right support, we will act quickly to put this right. Firms are already paying up to £47m in compensation for not providing appropriate support to borrowers.
“If you’re worried about keeping up with payments, we encourage you to talk to your lender as soon as possible.”