As the cost of living crisis worsens, the City watchdog has issued a warning to banks and other lenders, including credit providers.
The FCA asserts that it has identified poor lending practices across the industry, with 34 lenders exhibiting particularly egregious lapses that could result in regulatory action if they do not implement the required improvements.
The Financial Conduct Authority (FCA) has sent a “Dear CEO” letter to 3,500 financial services industry executives, including all regulated and unregulated Buy, Now Pay Later operators, to remind them of their obligations regarding the fair treatment of customers.
According to the FCA, these included imposing fees that only cover a company’s costs.
It follows work by the regulator on the treatment of persons with financial problems during the height of the COVID crisis, which, according to the FCA, has resulted in 34 lenders being ordered to make reforms following the discovery of “severe wrongdoing.
While examples of lenders giving the appropriate support to their customers were cited, the report revealed widespread issues.
“The majority of businesses need to have more effective conversations with their customers to fully comprehend their unique circumstances, so they can provide appropriate, customized support and ensure that debt repayment arrangements are sustainable.
“The FCA is also concerned that certain vulnerable consumers are not receiving the necessary help. And some lenders do not discuss the potential benefits of money guidance or free debt advice, nor do they assist borrowers in gaining access to these resources “The watchdog reported.
Sheldon Mills, the company’s executive director of consumers and competition, further stated: “The rising cost of living is having a significant impact on the personal finances of a large number of consumers, and we anticipate this trend to intensify over the next few months.
“For those struggling with debt, prompt action is crucial. All businesses must master the fundamentals and provide high-quality assistance. Where we observe more egregious misconduct, we are already taking steps to ensure these businesses improve.
‘The financial services industry plays a significant role in assisting consumers to manage their finances, and it should anticipate that we will scrutinize how they perform this function over the coming months.”
