FCA Demands Retail Banks Help Vulnerable COVID-19 Debtors

By Lucia Osborne-Crowley
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Law360, London (February 8, 2021, 1:29 PM GMT) -- The U.K.'s financial watchdog has warned retail banks that they must protect vulnerable consumers and had to support customers struggling to repay mounting debt as the COVID-19 crisis worsens.

The Financial Conduct Authority wrote to the chief executives of retail banks on Friday, urging them to support customers who are falling into extreme debt or are struggling to make payments as the COVID-19 crisis continues to put people at risk of financial harm.

"The last 11 months of coronavirus (COVID-19) disruption have highlighted the critical role that retail banks play in the daily life of millions of individuals and businesses," said David Geale, the FCA's director of retail banking and payments supervision. "As you respond and adjust, we expect you to act in a customer-centric way, with proper and early consideration of conduct risks."

The FCA said it expects retail banks to be conducting rigorous affordability checks on all loans to make sure they are not allowing customers to take on an unmanageable amount of debt. They should also have clear policies in place to help customers who are behind on their repayments, the watchdog added.

Banks must also ensure that they are clear with customers about the prices of loans, overdrafts and any consumer credit products during the pandemic, it noted.

The FCA told banks they should also offer customers sustainable arrangements to pay back loans, which take into account their living costs and circumstances. They should not pressure any customers into paying back loans faster than is reasonable, the regulator warned.

Firms must also give customers time to consider their options and seek debt advice if they choose to before making a decision about repaying their loans.

The watchdog also highlighted the importance of having staff who are trained in assisting people in financial distress.

The ban on lenders repossessing homes was extended until at least April, save in exceptional circumstances, the City watchdog confirmed. It did not specify what those circumstances were. However, it said it will allow lenders to repossess other consumer goods like cars as of Jan. 31, but only as a last resort.

The FCA also promised to also consider increasing the limit on contactless payments for goods and services as the pandemic continues to hurt home-owners and consumers.

The financial services regulator said in October that the estimated number of British consumers who have fallen into financial trouble has risen by two million since the onset of the coronavirus crisis. It urged those households to turn to their lenders for help.

--Editing by Joe Millis.

For a reprint of this article, please contact reprints@law360.com.

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