FCA tells motor finance houses to help borrowers in cost-of-living squeeze

The Financial Conduct Authority (FCA) said today it expects finance houses to learn the lessons from good and poor practice during the coronavirus (Covid-19) pandemic to help borrowers during the cost-of-living squeeze.

In a report published today aimed at a wide variety of finance sources, including motor finance, the FCA found examples of firms delivering good outcomes for customers – but others must do a lot better to support borrowers in financial difficulty.

It found that about 25% of motor finance houses monitor customers susceptible to financial difficulty compared to 80% for credit cards, 60% for mortgages and 50% for retail finance. About 11% of pawnbrokers monitored susceptible customers.

Overall, it said 30% of firms (15 out of 50) it reviewed sufficiently explored customer’s specific circumstances, which meant repayment agreements were often unaffordable and unsustainable.

The FCA has already told 32 firms to amend improve the way they treat customers and so far, seven of these firms have voluntarily agreed to pay £12 million in compensation to 60,000 customers.

The FCA will also be closely reviewing a further 40 firms in the coming months to make sure they are meeting its expectations and to protect customers from harm.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:

‘While many firms did well in supporting customers in difficulties during the pandemic, with our support and guidance, others sadly failed their customers.

‘Given the current cost of living challenges, it’s vital that the sector continues to learn lessons to make sure they support struggling customers.

‘We will take action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly.’

Firms should be:

• encouraging consumers to engage earlier when facing financial difficulties.
• offering tailored support, particularly for those with vulnerable characteristics.
• letting those in difficulties know about the availability of free, independent debt advice when appropriate.
• making sure their fees and charges are fair and only reflect the reasonable costs that firms incur.
• considering, when engaging with consumers, whether it would be appropriate to reduce, waive or cancel fees and charges.