The Financial Conduct Authority (FCA) has fined Barclays Bank UK PLC, Barclays Bank PLC and Clydesdale Financial Services Limited (Barclays) £26 million for failures in relation to their treatment of consumer credit customers who fell into arrears or experienced financial difficulties.
Barclays has pro-actively redressed these customers, paying over £273 million to at least 1,530,000 customer accounts since 2017. The redress programme is close to completion. The move acts a timely reminder to big insurers to give leeway to policyholders who are struggling with job loss, business downturn due to lockdowns and more.
Mark Steward, Executive Director of Enforcement and Market Oversight, said:
‘Consumers should feel reassured that their lender will work with them to help resolve any financial difficulties, whereas Barclays’s poor treatment of its customers risked making these difficulties worse.
‘Firms must treat consumer credit customers fairly, including when they find themselves in arrears. We will take action against unfair treatment, or where firm systems expose customers to the risk of unfairness. While this case predates the pandemic, this message is especially important as the impact of coronavirus continues to affect household incomes and budgets.’
Between April 2014 and December 2018 some retail and small business customers who had been offered consumer credit were treated poorly when they fell into arrears. The FCA found that Barclays failed to treat customers fairly or to act with due skill, care and diligence.
- failed to follow its customers’ contact policies for customers who fell into arrears
- failed to have appropriate conversations with customers to help understand the reasons for the arrears
- failed to properly understand customers’ circumstances leading it to offer unaffordable, or unsustainable, forbearance solutions
The FCA requires consumer credit firms to take adequate measures to properly understand customers’ financial difficulties. It also requires firms to show forbearance and due consideration to customers in arrears or in financial difficulties. Otherwise, a customer under financial pressures could end up making payments on a consumer credit loan at the expense of a priority debt, such as a mortgage, council tax, child support and utility bills.
Barclays identified some of the problems as early as 2014, but due to systems and controls failings these were not fully rectified. Adequate measures to resolve the problems were subsequently taken. Barclays has contacted all customers whom they think may be due for compensation. The FCA has monitored this programme.
The FCA took the redress programme into account when setting its fine. Barclays did not dispute the FCA’s findings and agreed to settle the case. As a result, they qualified for a 30% discount and the financial penalty would otherwise have been £37,223,500.
The fair and appropriate treatment of customers experiencing financial difficulty remains a focus for the FCA and the FCA is working to ensure that firms raise their standards in this area. Firms should ensure there is appropriate investment in their staff who work in collections and recoveries, including in training and effective management information, to allow firms to monitor customer outcomes and take appropriate action where needed.
The FCA recognises the challenges firms face in this area due to coronavirus (Covid-19), which only heightens the importance of firms treating customers in financial difficulty fairly and appropriately.