The Financial Conduct Authority (FCA) has called on lenders to remember the standards they should meet as consumers across the country are affected by the rising cost of living.
With household bills expected to continue to rise into the autumn, the FCA says it is important that firms act now to make sure borrowers struggling with payments and customers in vulnerable circumstances can access the help they need.
In the letter, the FCA says it is concerned 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 helping and supporting borrowers to access these.
The FCA says while these concerns were seen broadly across the sector, more serious failings were found at more than 30 firms largely in the consumer and credit sector.
It tells lenders to make sure that their approach to taking on new borrowers takes account of the financial pressure they may face and the impact on their expenditure.
It also asks lenders to consider and improve how they treat consumers in vulnerable circumstances as well as effectively direct those customers who need money guidance or free debt advice.
FCA executive director of consumers and competition Sheldon Mills says: “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.”
“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 FCA’s letter CRIF Decision Solutions managing director Sara Costantini says: “We’re supportive of the FCA’s call to action for lenders today. The cost-of-living crisis is rampant, and lenders have a vital role in helping alleviate pressures on households by providing access to affordable credit.”
“Despite this, many are being locked out of this financial support or face higher interest rates than necessary as lenders are unable to build a clear and accurate picture of people’s finances.”
Phoebus Software sales and marketing director Richard Pike comments: “In this rising inflation and interest environment, even though the increments are small, real wages are reportedly already struggling to keep pace. So it is inevitable that some households will be starting to feel the pinch.”
“It is encouraging, therefore, to read that the FCA has reminded lenders of their responsibility to provide help to customers struggling with payments. However, this does of course mean that lenders will need the resources to identify vulnerable borrowers at an early stage to be able to offer the help that is required.”
Biggest problem with lenders is that they wont do anything until the borrowers are actually in arrears. Telling them early before this happens when there’s an expected problem coming does not compute. And of course when you are in arrears you can’t then do very much such as extend the term or even switch to I/O (as you’re in arrears of course). Crazy.