Seven financial providers have paid £12m in compensation to nearly 60,000 customers after the FCA intervened over the treatment of hard-pressed borrowers.
More compensation payments could be on the way after the FCA said it had spoken to 32 firms over poor practice during the Covid-19 pandemic and since then.
The regulator said the firms had not done enough to help customers faced with financial difficulties.
In a report published today, the FCA said it found examples of many firms delivering good outcomes for customers – but others must do “a lot better” to support borrowers in financial difficulty.
Just 30% of firms (15 out of 50) it reviewed sufficiently explored customer’s specific circumstances, which meant repayment agreements were often “unaffordable and unsustainable.”
The FCA has so far told 32 firms, mainly lenders, to make changes to improve the way they treat customers. Seven of these firms have voluntarily agreed to pay £12 million in compensation to nearly 60,000 customers.
The FCA says it will review a further 40 firms in the coming months to make sure they are meeting its expectations and to protect customers from harm.
The watchdog said it expected lenders to learn the lessons from “good and poor practice” during the Coronavirus pandemic to help borrowers during the current cost-of-living squeeze.
The FCA said during the pandemic it acted quickly to put in place guidance that led to more than 5m payment deferrals for mortgage and credit customers. This was followed by guidance on tailored support.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “While many firms did well in supporting customers in difficulties during the pandemic, with our support and guidance, others sadly failed their customers.
“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.”
The FCA says that lenders should encourage consumers to engage earlier when facing financial difficulties and offer tailored support, especially for those with vulnerable characteristics. Fees must also be fair and reasonable.
