UK financial services firms need to be doing more and better to help customers struggling with finances due to the pandemic and deteriorating economic conditions. That’s the conclusion of a new report on Borrowers in Financial Difficulty from regulator the Financial Conduct Authority (FCA).

The survey work has led seven firms to estimate they need to provide £12.38m ($13.9m) in remediation to 59,491 customers, and 32 out of 65 firms surveyed have been “asked to make material and significant changes to their processes”.

Challenges ahead

The FCA says it wants firms “to consider the contents of this report and take immediate action where necessary to ensure that firms are well placed to support customers now, and as the situation becomes more challenging in the months ahead”.

Four key points are made by the regulator:

• Firms could do more to encourage customers to engage, particularly when payment issues start to arise.
• Ineffective discussions can lead to unfair, inappropriate and/or unsustainable forbearance arrangements.
• Communication of the availability of independent, not-for-profit debt advice and the benefits this might have is too often inadequate.
• Fees and charges may be applied to customer accounts inappropriately and this, along with unpaid interest accruing, may result in escalating balances.

The FCA examined 400 retail lending firms, made 69 assessments across a range of 65 firms, carried out a focused piece of work with 25 of the largest UK lenders, and viewed customer contact experience.

The report concludes: “As the cost of living continues to rise, we expect that more customers will need support from their lenders … We will continue to test the way in which firms are supporting borrowers in financial difficulty … We will take robust action where we identify firms who are delivering poor customer outcomes.”