Seven UK financial lenders have been forced to hand back £12.4m in compensation to almost 60,000 customers as a result of poor practices amid the Covid pandemic and cost-of-living crisis, the Financial Conduct Authority said on Thursday.
In a report into borrowers in financial difficulty during the pandemic, the watchdog revealed that it had told at least 32 firms to improve their relationship with customers.
It found repayment agreements that were “unaffordable and unsustainable”. The report came as the Bank of England hammered mortgage holders with another interest rate rise, taking its lending benchmark to 3% amid a cost-of-living and wages squeeze.
The FCA adds it will closely review a further 40 firms in the coming months “to make sure they are meeting its expectations and to protect customers from harm”.
Laura Suter, head of personal finance at AJ Bell said too many borrowers weren’t helped during the pandemic and were left with unaffordable repayments or charged high fees for falling behind with their payments.
“While the pandemic was often described as ‘unprecedented’ we’ve now immediately rolled into another crisis, with even more people expected to struggle with their bills than during the peak of the pandemic,” she said.
“The failings by lenders meant people with debt were left with ‘unaffordable and unsustainable’ repayments, which will no doubt have had a big impact on their lives. The regulator has said more customers should be offered things like a reduction in interest rates or extending the term of the mortgage, rather than just reducing monthly payments.”
“Lenders should also consider waiving fees and make it easier for customers to access the right support and signpost them to debt charities or money guidance, where needed.”
“The regulator also found that lots of people don’t want to contact their lender when they miss a payment, thinking that they either won’t be helpful or won’t be able to help. If someone is struggling to pay their mortgage or debt repayments it’s best to contact your lender as soon as possible to flag the difficulties and find a solution. While it’s often a scary prospect to admit that you’re having difficulties, it’s far better to address it head-on than bury your head in the sand.”
Reporting by Frank Prenesti for Sharecast.com
