Are customers in arrears treated fairly by lenders?

 

The Financial Conduct Authority (FCA) has found that whilst many firms are improving the way they deal with customers in early arrears, there are a number of areas where consumer credit firms still need to improve their practices.

 

The Financial Conduct Authority (FCA) has found that whilst many firms are improving the way they deal with customers in early arrears, there are a number of areas where consumer credit firms still need to improve their practices.

 

The Early Arrears Management in Unsecured Lending Thematic Review looked at financial companies ranging from high street banks to small providers of things likes credit cards, personal loans and store cards. 

 

The FCA has previously set out rules to ensure that customers who can’t make their repayments are treated fairly, with those in default given forbearance and due consideration. 

 

The report stated that whether a company managed this was dependant on the underlying culture of the organisation. In many cases, firms organised their staff and processes to deliver fair outcomes for their customers by seeking to obtain an affordable repayment solution or end the credit agreement. In contrast, this was not evidenced to the same level across the retail finance and online personal loan providers in the sample, some of whom primarily focussed on collecting payment as soon as possible.

 

In slightly under two thirds of firms examined, the FCA found that culturally there were good intentions towards customers but the firms’ intentions and policies were not executed effectively in practice.

 

David Rodger, CEO of Debt Advice Foundation said;

 

“The research noted that a customer’s debt had often increased by the time anyone realised they were in trouble because firms added fees and charges to the account which they wouldn’t have applied if they had identified the customer’s circumstances earlier.

 

“Within firms which focused only on securing repayment quickly, there was widespread evidence of poor customer outcomes. This demonstrates that when that customers in debt aren’t met with empathy and practical help, they are the ones that really suffer.

 

“Once someone realises they are going to default on payments and can’t see a way out, they need to get in touch with their creditors or alternatively contact a debt charity for help, so that the late fees and admin charges don’t keep on piling up.”