FCA reminds lenders to support consumers struggling with cost of living

The FCA has written to more than 3,500 lenders to remind them of their required standards as UK consumers continue to be affected by the rising cost of living.

With household bills expected to continue to rise into the autumn, the FCA said that firms need to act now to ensure borrowers struggling with payments and customers in vulnerable circumstances can access the help they need.

The regulator’s work has looked at how borrowers in financial difficulty are treated by lenders and stated that most firms need to have better conversations to fully understand their customers’ individual circumstances, so they can provide tailored support and ensure arrangements to pay back debt are sustainable.

According to the letter, the FCA has also expressed concern that some customers in vulnerable circumstances are not getting the support they need, with some lenders not discussing the potential benefits of money guidance or free debt advice, or supporting borrowers to access them.

These concerns were seen “broadly across the sector”, the FCA added, with more serious failings found at more than 30 firms – largely in the consumer credit sector. The regulator is expecting these firms to make improvements in how customers are treated.

“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,” said FCA executive director of consumers and competition, Sheldon Mills.

“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.”

Commenting on the regulator’s letter to lenders, Hargreaves Lansdown senior personal finance analyst, Sarah Coles, added: “When people can’t cope with their debts, they often bury their head in the sand, so it’s up to the banks to make the effort to contact them and offer help. The FCA says some banks aren’t doing enough on this front.

“When they do reach customers, they need to work harder to appreciate their circumstances, so they can offer support that’s actually going to make a difference. It says that too many are setting up repayment plans that people have no hope of being able to afford. Some are also failing to appreciate the needs of vulnerable customers, who may need more help. The FCA says banks need to train staff, so they can understand people’s problems and find a way to support them.

“Lenders shouldn’t be charging more in fees than it actually costs the business, and the FCA found that some were applying charges inconsistently, and in a way that risked making everything even worse for their customers.

“Banks need to up their game, but if you’re having trouble managing your debts, it shouldn’t put you off getting in touch and talking to them. They should help you find a solution, which will do far less damage to your credit rating than if you just miss payments.”

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