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Summary
- The Financial Conduct Authority has slapped the UK’s leading bank with £26 million fine for mistreating its customers.
- Barclays exerted undue pressure on customers to prioritise its debt over their inability to pay back loans.
- The FTSE 100 listed bank has issued an apology to affected customers for not providing the level of service and treating them poorly
As the onslaught of the unprecedented crisis unfolded, many people are still finding it difficult to make their ends meet. At the same time, repayments of loans got impacted as many customers lost their jobs and people being put off furlough. In a bid to support the customers, UK financial regulator Financial Conduct Authority (FCA) has fined Barclays £26 million for mistreating its customers who fell into financial difficulties and have been struggling to repay their debt.
This is the biggest fine that has been imposed for a breach of consumer credit rules by the financial regulator. It has also warned the British lenders that it cannot mistreat customers poorly and not support them during the unprecedented crisis.
Between 2014 and 2018, retail and commercial customers who were facing financial hardships and failed to repay their loans and credit card bills were found to be mistreated by Barclays Plc (LON: BARC). The bank has been accused of failing to learn about customers’ individual situations that eventually led to an increase in arrears.
Also read: Barclays And Natwest Group in Focus as Business Borrowing from Banks Surge Fivefold
This also meant that banks exerted undue pressure on customers to prioritise its debt over other key financial responsibilities such as their mortgage, council tax, child support or utility bills and ended up pushing struggling borrowers towards unaffordable or unsustainable repayment schedules.
According to FCA, Barclays was supposed to act with due skill, care, and diligence. However, it failed to treat customers fairly.
The FTSE 100 listed bank has issued an apology to affected customers for not providing the level of service. The bank is doing everything it takes to implement changes to its systems and provide training to colleagues to improve customer experiences.
The imposition of the fine will certainly set an example for financial institutions. The penalising of the bank has come at the right time when the coronavirus pandemic continues to impact the budgets and household incomes, individuals, and businesses. The action would be taken against unfair treatment of customers, according to the FCA.
Also read: FCA predicts disruptions in financial markets post the end of Brexit transition
The banks are expected to find a delicate balance between growing debts and handling collection and recoveries as the probability of default by the customers has gone up amid the crisis. It will be interesting to see as to how households and businesses will cope with debts on their balance sheets during the unprecedented crisis.
Meanwhile, financial institutions have started working towards developing a set of procedures with the Treasury to handle debt collection and recoveries for state-backed support schemes for small businesses. However, these procedures might not be applicable to conventional loans and credit products availed during the coronavirus crisis. During the peak of the unprecedented crisis, UK lenders were warned for profiteering as they were accused of charging exorbitant rates to capitalise on the surge in demand for emergency loan during the coronavirus crisis.
