UK banks to pay a £47M redress to struggling borrowers
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The UK Financial Conduct Authority (FCA) has issued an order for banks and lenders to support borrowers that are struggling financially to repay their loans and mortgages. The decision was made on Thursday, and it came as many people across the UK were affected by the rapid increase in interest rates.
UK banks to pay a £47M redress
The UK financial market watchdog is currently working with nearly 100 lenders to analyze how they will treat borrowers in the country. The regulator said that it had found multiple issues, such as a lack of adequate customized support for individual circumstances. The regulator also notices a failure to give appropriate responses to vulnerable clients and the lack of efficient money guidance and debt advice.
The regulator has also secured up to £47 million worth of redress from 17 lenders for more than 195,000 customers. These lenders failed to support customers when they were facing a challenging situation.
The Executive Director of Consumers and Competition at the FCA, Sheldon Mills, said that the regulator did not see firms offering the needed support. As such, there was a need to act swiftly and solve the issue.
Mills commented on the development, saying, “Where we see firms not providing the right support, we will act quickly to put this right. Firms are already paying up to £40M in compensation for not providing appropriate support to borrowers.”
The FCA noted that it had worked with nearly 100 lenders to assess how they treated borrowers when they faced tough financial situations. The FCA said that many institutions were using its temporary guidance to support borrowers during uncertain times, and the proposals put forth would ensure that the process continues.
Extending the rules made during the pandemic
The latest guidance that has been issued by the FCA on the matter is an extension of the rules that were formulated by the authority during the pandemic. These rules offer relief to stressed browsers. Moreover, the regulator is also considering making the rules permanent.
The rules will also require “mortgage, consumer credit, and overdraft providers” to offer support to struggling customers in making debt repayments when they make lower or temporary zero payments or when they change the terms of debt.
It is also important to ensure that the payment arrangements used are the appropriate ones and that customers will get the right financial guidance. The lenders have also been cautioned against having higher arrears fees than necessary, and they should also assess the overall effect of the support arrangements on mortgage balances.
Mills further said that the majority of firms were following its temporary guidance measures that were created during the pandemic. The guidance would support borrowers when they face tough situations.
The executive added that the proposed measures would guarantee that the strategies announced during the pandemic would guarantee that borrowers were still supported. Those having an issue keeping up with payments are also encouraged to reach out to their lender.