Rules on help for borrowers in debt crisis may remain

Requirements for lenders to support borrowers in difficulty that were put in place during the coronavirus pandemic could be made permanent under proposals by the City regulator.

The rules and guidance apply to products such as mortgages, overdrafts and other forms of consumer credit.

Providers have to give the right support to customers struggling to make repayments, which may include making reduced or no payments temporarily or changing the mortgage or loan term, for example.

Firms should not charge arrears fees that are higher than necessary to recover firms’ reasonable costs for consumer credit customers and they should consider the overall impact of support arrangements on mortgage balances.

They should also ensure repayment arrangements are appropriate and signpost customers to free, impartial money guidance and debt advice.

The consultation document said: “Firms should offer appropriate support to all customers experiencing financial difficulty.

“Our proposals build on and enhance our expectations of firms to deliver good outcomes for customers in financial difficulty.”

The consultation by the Financial Conduct Authority (FCA) is open until July 13.

The regulator expects new rules to come into force in the first half of 2024.

The FCA has worked with nearly 100 lenders on how they treat borrowers in financial difficulty and has sought significant improvements from many of them.

It said issues identified included not adequately tailoring support to individual circumstances, failing to respond appropriately to customers with characteristics of vulnerability, and not effectively engaging with customers about money guidance and debt advice.

The FCA has so far secured up to £47 million of redress from 17 firms, which it has not named, for more than 195,000 customers.

It said it has given detailed feedback to all the firms it worked with on areas where they need to improve.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Many firms have been following our temporary guidance, developed during the pandemic, to support borrowers in tough times. Our proposals today will help ensure this continues.

“Where we see firms not providing the right support, we will act quickly to put this right.

“Firms are already paying up to £47m in compensation for not providing appropriate support to borrowers.

“If you’re worried about keeping up with payments, we encourage you to talk to your lender as soon as possible.”

CONSULTATION: The Financial Conduct Authority has looked into how lenders treat borrowers in financial difficulty.