Temporary measures forcing lenders to offer greater support to borrowers in financial difficulties could become permanent, under new proposals by the Financial Conduct Authority.
This announcement comes as the FCA revealed that 17 lenders will pay up to £47m in redress to financially-distressed borrowers, after failing to offer appropriate support.
These payments will be made to 195,000 customers, including borrowers with mortgages, loans and overdrafts.
These measures were initially introduced during the pandemic but with the cost-of-living crisis deepening the FCA has been working with almost 100 lenders to ensure proper help is given to those who get into financial difficulties and fall behind with repayments.
The regulator said many of these lenders are now making significant improvements to their processes. Issues identified include: not tailoring support to individual circumstances, failing to respond appropriately to customers with characteristics of vulnerability, and not effectively engaging with customers about money guidance and debt advice.
FCA executive director of consumers and competition Sheldon Mills says: “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.”
Under FCA rules and guidance mortgage and credit providers have to:
- provide the right support to customers struggling to make repayments, which may include making reduced or no payments temporarily, or changing the mortgage or loan term, taking account of individual circumstances
- ensure that repayment arrangements are appropriate
- signpost customers to free, impartial money guidance and debt advice
- not charge arrears fees that are higher than necessary to recover firms’ reasonable costs for consumer credit customers
- consider the overall impact of support arrangements on mortgage balances
