Lenders should prepare for extra regulatory scrutiny on how they treat their borrowers during the pandemic, Equifax has warned.
The credit reference agency said the pandemic has accelerated a shift toward the digitisation of lending and a move to open banking, but said this brings new challenges and opportunities.
Robert McKechnie, open banking expert at Equifax UK, said the “true value and benefit of technological transformation and investment” has become clear for financial services companies during lockdown.
“The future identification and adoption of new capabilities will be extremely important in both the short and long term, especially as the impact of COVID-19 continues to shape consumer outlook and behaviour,” he said.
But he warned that the Financial Conduct Authority is likely to be looking closely at how lending decisions are made and how struggling borrowers are treated in the current economic environment.
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“In a pandemic era of heightened financial vulnerability and uncertainty, decisions around credit and how companies interact with customers will be scrutinised more closely,” McKechnie added.
“This is evidenced by the FCA’s draft guidance stating firms must recognise individual circumstances and be flexible in their approach to minimise stress and anxiety.
“Continued digitisation, through the adoption of platforms that deliver early customer insights and real-time data, can provide a pathway to implement stringent affordability and income verification assessments, while identifying financially vulnerable customers and abiding by regulatory requirements.”