July 29, 2020 / 1:01 PM / 6 days ago

UK watchdog steps up scrutiny of how banks treat COVID-stressed consumers

LONDON (Reuters) - Financial firms will face closer scrutiny of how they deal with an expected rise in vulnerable customers as COVID-19 relief measures are phased out after October, Britain’s Financial Conduct Authority (FCA) said on Wednesday.

FILE PHOTO: Workers cross London Bridge during the morning rush hour in London, Britain, Sept. 25, 2018. REUTERS/Toby Melville/File Photo

The FCA published draft guidance setting out how firms should treat customers facing financial, health or other difficulties that make it harder for them to keep up with repayments.

The number of potentially vulnerable consumers has already risen by 1.5 million since the pandemic started, to total 25.5 million, or about half of UK adults, the FCA says.

Numbers are likely to rise further as mortgage and credit card payment holidays granted by banks come to an end in the autumn, along with furlough schemes that have kept people off the dole queue for now.

Nisha Arora, the FCA’s director of retail, said the guidance, due to formally come into effect by early 2021, fleshes out existing principles that require firms to treat their customers fairly.

Work on the guidance was already underway but has been made more urgent by the pandemic. The proposals are open to industry consultation through September.

“A lot of this is about saying to firms to pre-empt problems and we will be holding firms to account,” Arora told Reuters.

“Firms should be doing this right now, this gives them greater clarity on our expectations. I don’t think firms should be waiting on this one.”

Firms should not wait to be contacted if they spot problems emerging such as missed payments and should respond flexibly and not constantly be using automated responses, she said.

“This draft guidance will provide a practical framework to help identify vulnerable customers and ensure they receive the best possible support,” said Eric Leenders, managing director of personal finance at UK Finance, Britain’s banking industry body.

Reporting by Huw Jones; Editing by David Holmes

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