UK borrowers owe millions as lender fails

When the COVID-19 pandemic hit in 2020, the UK Financial Conduct Authority (FCA) has asked lenders across the country to offer payment deferrals to help customers who are struggling to meet their repayment obligations due to the crisis.

In a published report the FCA last week noted that the initiative had resulted in 1.8 million mortgage loans and up to 4 million deferred payment consumer credit agreements.

Now, in a retrospective review of the refund deferral system, the FCA has found that some companies have failed to meet its expectations and has taken steps to ensure they compensate customers.

Of the 65 lenders assessed by the FCA, 32 were asked to make “significant and significant changes to their processes”. Of these, so far seven have estimated they have to provide £12.38 million ($14.18 million) in repairs to around 60,000 customers.

The report identified four areas where financial institutions have underperformed: customer engagement, effective conversations with customers, helping customers consider and access money and debt, and the imposition of fees and charges.

To improve in these areas, the FCA report called on companies to ensure they devote sufficient resources to their awareness campaigns and staff training initiatives, provide customers with forbearance, which take into account their personal circumstances, and to ensure that fees and charges for arrears are applied “fairly and only reflect the reasonable costs incurred”.

The COVID-19 Rebound Loan Program

Beyond consumer credit, lenders have also been instrumental in supporting small and medium-sized enterprises (SMEs) throughout the exceptional events of 2020-2021.

Next, the Bounce Back Loan Scheme (BBLS) provided government-backed loans to SMEs that were negatively affected by nationwide lockdowns and the UK’s restricted business environment.

The first assessment of the government’s COVID-19 loan guarantee programs, published in june, found that up to half a million businesses could have closed permanently in 2020 without the BBLS. Taken together, the BBLS and other COVID-19 loan guarantee programs for large businesses saved up to 2.9 million jobs, according to the report.

Unfortunately, however, the unprecedented nature of the program has made it vulnerable to fraud. The government reported of the £46.5 billion ($53.26 billion) lent under the BBLS, £1.1 billion ($1.26 billion) was flagged as suspected fraud.

Continue reading: Report: UK already suspects $1.3bn fraudulent loans

In a letter to lenders last year, the FCA wrote that “BBLS was launched with limited anti-fraud measures compared to [business as usual] loans under the rapid business financing objective.

As such, the regulator works with businesses when they collect loan repayments to uncover instances of fraud while ensuring that legitimate borrowers are treated fairly. He has already issued tips on the specific obligations of lenders who participated in the BBLS.

Unlike the guidance for consumer loans, however, the FCA found no evidence that lenders failed to meet the due process requirements set out in the BBLS Payment Collection Rules.

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