Regulator highlights the importance of applying lessons from the pandemic to aid borrowers amid ongoing cost-of-living pressures

The Financial Conduct Authority (FCA) has called on businesses to apply the lessons learned from the COVID-19 pandemic to better support borrowers who are struggling with the ongoing cost-of-living crisis. In its recent report, the regulator emphasised that while some firms have demonstrated good practices, there is room for improvement in how they assist customers experiencing financial difficulties.

The FCA outlined key areas where firms should focus their efforts, including encouraging customers to seek help sooner, providing tailored solutions, informing them of free debt advice options, and ensuring that any fees charged are fair and reflective of actual costs. During the pandemic, temporary measures such as payment holidays were introduced to assist individuals facing unexpected financial challenges. These measures resulted in more than five million payment deferrals for mortgage and credit customers.

However, despite these efforts, the FCA found that only 30% of firms properly assessed their customers’ specific situations, which led to repayment plans that were often unmanageable. In response, the FCA has instructed 32 firms to make improvements in how they treat customers, and some have already agreed to compensate nearly 60,000 customers, amounting to £12 million.

The regulator also highlighted that many firms still struggle with providing adequate support. In some cases, excessive bureaucracy and repeated transfers between departments led to poor outcomes for customers, who were often left frustrated and disengaged. The FCA also pointed out that staff training plans were not always properly implemented, and there was a lack of forbearance options, such as reducing interest rates, that could alleviate borrowers’ financial strain.

“While many firms supported customers well during the pandemic, others failed to meet the necessary standards,” said Sheldon Mills, executive director of consumers and competition at the FCA. “Given the current financial pressures, it is crucial that businesses continue to improve and meet our requirements to treat customers in financial difficulty fairly.” The FCA warned that firms who do not meet these standards could face restrictions or bans on lending.

In light of the rising cost of living and higher interest rates, Peter Tutton from StepChange Debt Charity stressed the importance of effective communication and training to ensure that borrowers are not deterred from seeking help. “The language and tone used by firms can make a significant difference,” Tutton explained. “By improving customer service and making debt advice more accessible, businesses can help borrowers find better solutions to their financial difficulties.”

For individuals struggling with repayments, the FCA encourages them to contact their lenders directly and seek assistance from the Government’s MoneyHelper service, which provides free financial advice.