FCA’s Borrowers in Financial Difficulty (BiFD) project was launched in March 2021 to monitor how firms support borrowers and intervene where necessary, particularly in relation to the financial effects of the Covid-19 pandemic. As part of the project, FCA has published a report which sets out examples of both good and bad practice during the pandemic, and areas in which firms must improve. Sheldon Mills, FCA’s Executive Director of Consumers and Competition, said some firms had ‘sadly failed their customers’ and must learn lessons to support customers amidst the effects of the pandemic and the current cost-of-living challenges.
Only 30% of the reviewed firms sufficiently explored customers’ specific circumstances, meaning repayment agreements were often unaffordable and unsustainable for the customers. As a result of the report, FCA has told 32 firms to improve the way they treat customers, of which 7 have already voluntarily agreed to pay £12 million in compensation to almost 60,000 customers. Increasing numbers of customers are likely to require support from their lenders as the cost-of-living crisis progresses: 19,000 people expect to struggle with their finances in the months ahead, according to FCA’s Financial Lives survey. Almost 8 million people reported finding paying for basic items a heavy burden – this figure is 2.5 million more than in 2020.
FCA is to continue reviewing a further 40 firms in the next few months, in order to ensure they meet expectations and protect customers. The key areas identified by the report for firms to focus on are:
- engaging with customers;
- effectiveness of conversations with customers;
- helping customers to consider and access money guidance and debt advice; and
- fees and charges.
Customers can also contact their lenders if they are struggling, or alternatively contact the government-backed service MoneyHelper for tips on debt and squeezed income.
The FCA’s press release on the report can be accessed here.