Seven unnamed UK lenders have agreed to pay £12mn in compensation to customers treated unfairly after falling into difficulty during the Covid pandemic, the financial watchdog has said.
The Financial Conduct Authority carried out 69 assessments across 65 companies in a report released on Thursday that detailed failings in the treatment of distressed borrowers. The compensation will be shared among 60,000 borrowers.
The report included a survey on how lenders imposed debt fees and charges and examined measures used to deal with struggling customers.
Only 15 of the 50 lenders involved in one part of the exercise “sufficiently explored” customers’ circumstances before agreeing repayment schemes, which meant “repayment agreements were often unaffordable and unsustainable”, the report found.
The watchdog also criticised lenders for having confusing communication channels and for heavily relying on scripts that had “no relevance to the customer”.
“Given the current cost of living challenges, it’s vital that the sector continues to learn lessons to make sure they support struggling customers,” Sheldon Mills, executive director of consumers and competition at the FCA, said.
“We will take action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly,” he added.
Customers surveyed by the FCA said the banks had failed to offer adequate support. “There’s no empathy or personality. It’s just ticking boxes. You feel so judged,” one borrower said.
In June, the watchdog wrote to more than 3,500 lenders across the UK, warning that it had found evidence of “inconsistent practice” used in the treatment of struggling borrowers.
These lenders included both commercial banks and providers of “buy now, pay later” services, a popular but controversial form of short-term credit that is currently unregulated in the UK.
In July, the FCA warned that it would take action if banks did not improve their treatment of small and medium-sized businesses grappling with a worsening cost of living crisis, after it uncovered “repeated instances” of poor practice.