Banks mistreating small business borrowers, warns FCA
Banks have been mistreating small business borrowers, a review by the City watchdog has found.
The Financial Conduct Authority (FCA) has written to the chairs of all retail banks with small business customers, saying it was “disappointed to find repeated instances of poor customer outcomes and failures to treat customers fairly”.
The FCA regulator reviewed 11 banks’ collection practices and has ordered bank boards to improve the way struggling business borrowers are treated.
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The review covered small businesses who borrowed £25,000 or less, including those who obtained government-backed bounce back loans during the pandemic.
It identified a number of issues, including lenders not treating small businesses fairly when they try to agree to a sustainable payment plan and will put together unaffordable options. It also found that staff did not have the right training to support customers, and lenders not having clear policies to help staff identify and support vulnerable customers.
The FCA also found a lack of quality assurance and testing for their processes to ensure they deliver fair results for customers, meaning problems may go undetected.
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The regulator has provided feedback to the individual firms it reviewed but is calling on the whole sector to take action.
Its ‘dear chair’ letter tells the banks’ boards to ensure that they are meeting the FCA’s expectations and to inform the regulator if they are unable to do so.
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“People across the country will be affected by the rising cost of living – and this includes small businesses,” said Sheldon Mills, the FCA’s executive director for consumers and competition.
“We were disappointed to find repeated instances of these customers not being treated fairly by banks when they’re struggling. We expect the whole sector to act quickly to improve this. We will take action if problems continue.”
