The Financial Conduct Authority (FCA) has fined Barclays £26m for poor treatment of customers in financial trouble, and has warned all financial institutions to ensure they act fairly for those in difficulty as a result of Covid-19
The regulator took action against Barclays Bank UK, Barclays Bank and Clydesdale Financial Services Ltd (Barclays) for failures in relation to their treatment of consumer credit customers who fell into arrears or experienced financial difficulties over the period between April 2014 and December 2018.
The FCA found that Barclays failed to treat some retail and small business customers fairly or to act with due skill, care and diligence.
Specifically, the bank 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; and 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, arguing that 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.
However, subsequently Barclays pro-actively addressed the problem, paying over £273m to at least 1,530,000 customer accounts since 2017, and has contacted all customers whom they think may be due for compensation. The FCA has monitored this programme.
Mark Steward, FCA 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.
‘While this case predates the pandemic, this message is especially important as the impact of coronavirus continues to affect household incomes and budgets.’
The FCA took the redress programme into account when setting its fine, which qualified for a 30% discount and would otherwise have been £37,223,500.