The regulator will dedicate “significant resources” into monitoring how consumer lenders have treated borrowers hit by Covid-19 and vowed to take action on those failing to meet its forbearance guidance.
Jonathan Davidson, executive director of supervision, retail and authorisations at the Financial Conduct Authority (FCA), said the regulator will consider how well consumer lenders have planned, resourced and trained their staff to ensure that borrowers get appropriate support and forbearance, when they need it.
Speaking at the Credit Risk Festival, Davidson said although the majority of consumer lenders have followed the FCA’s guidance, the regulator will engage with firms that haven’t and, if necessary, will take action where they have failed to meet standards.
“We will be looking for firms to be flexible and employ a full range of short and long-term forbearance options to support consumers and minimise avoidable difficulties and anxiety,” he said.
“We have also set up a small business unit to coordinate the activities across the FCA to identify and address issues for small businesses.
“I understand that this is a difficult environment, and we are not looking to catch out firms on minor mistakes.
“We want to work together to support consumers and ensure they get the best possible outcomes.
“Where we see firms trying to do the right thing, we intend to work with you to support the resolution of these issues. Nonetheless, if we do see significant issues, we will intervene.”
Davidson highlighted that the FCA expects consumer lenders to offer reasonable and sustainable repayment plans tailored and suitable to individual circumstances.
He said they should freeze interest, fees and charges to prevent balances escalating and respond to the particular needs and challenges facing vulnerable customers.
They should ideally contact borrowers at an early stage to provide appropriate support to avoid them getting into difficulty, Davidson added.
“It is clear that this crisis is not over yet,” he said.
“We face a second wave and the economic challenges of coping with restrictions that come with an extended pandemic.
“There may be further drops in employment and growth, adversely impacting financial resilience and mental health, and deeper damage for consumers in the credit markets.
“With this new phase of the crisis, there is no time to rest on our laurels. So I want to reiterate our expectations as we move into this next phase.”