The City watchdog has warned UK lenders to do more to support struggling borrowers hit by the cost of living crisis, including offering payment holidays and waiving interest for some of the most at-risk customers.
In a letter to more than 3,500 lenders, including major high street banks and buy nowpay later firms, the Financial Conduct Authority (FCA) said firms needed to respond “flexibly” and offer a range of options to support customers beyond arranging how to collect missed payments.
It said lenders should take “early action” to support borrowers under financial strain, and consider accepting reduced loan repayments, waiving or freezing interest, and extending the terms of customer loans.
The watchdog added that lenders needed to make sure those arrangements were sustainable, and should regularly monitor and review agreements to ensure they were still appropriate for customers.
Sheldon Mills, an executive director for consumers and competition at the FCA, said lenders should expect the watchdog “to pay close attention to how they do that over the next few months”.
The intervention still falls short of the kind of support that borrowers were expected to give during the pandemic, when customers were initially allowed to request mortgage and loan repayment holidays for up to three months to help ease financial pressures during lockdown.
However, the FCA could still update its guidance if conditions for borrowers deteriorate further.