"Firms are already paying up to £47m in compensation for not providing appropriate support to borrowers."
The FCA is proposing to make permanent requirements on lenders to support borrowers in difficulty, which were put in place during the pandemic.
The new rules come as the FCA secures £47m of redress from 17 firms for over 195,000 customers.
The FCA has worked with almost 100 lenders on how they treat borrowers in financial difficulty and has sought significant improvements from many of them. 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.
Under the new rules and guidance, mortgage, consumer credit and overdraft providers will have to provide 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, taking account of individual circumstances.
The rules would also ensure that repayment arrangements are appropriate and consider the overall impact of support arrangements on mortgage balances.
Lenders would also have to signpost customers to free, impartial money guidance and debt advice and not charge arrears fees that are higher than necessary to recover firms’ reasonable costs for consumer credit customers.
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."
Richard Lane, director of external affairs at StepChange, commented: “High interest rates and inflation continue to place immense pressure on household finances, and demand for our services has been consistently higher this year compared to last, so the FCA’s proposals to ensure borrowers have the support they need are crucial.
“Our own research has shown that people showing signs of financial difficulty need help as early as possible to prevent them getting trapped in a spiral of harmful, unaffordable borrowing in order to make ends meet. Communications from lenders making demand for payment can be frightening for people experiencing problem debt, causing them to disengage, an issue which we’ve found to be more prominent among borrowers with additional vulnerabilities.
“It must be a priority for lenders to focus on developing appropriate support for their customers, which identifies financial difficulty at the earliest possible stage, ensures support is tailored to individual needs, and makes effective referrals to free debt and money advice.”
