"While many firms did well in supporting customers in difficulties during the pandemic, with our support and guidance, others sadly failed their customers."
The FCA has announced that seven lenders have agreed to pay £12 million in compensation related to treatment of borrowers struggling to pay their mortgages during the Covid-19 pandemic.
More than five million payment deferrals were taken out by mortgage and credit customers during the pandemic, but a new report from the regulator found that lenders "must do a lot better to support borrowers in financial difficulty".
Just 30% of firms (15 out of 50) it reviewed sufficiently explored customer’s specific circumstances, which meant repayment agreements were often unaffordable and unsustainable.
The FCA has already told 32 firms to make changes to improve the way they treat customers and so far, seven of these firms have voluntarily agreed to pay £12 million in compensation to nearly 60,000 customers.
The FCA will also be closely reviewing a further 40 firms in the coming months to make sure they are meeting its expectations and to protect customers from harm.
The regulator added that it expects lenders to learn the lessons from good and poor practice during the pandemic to help borrowers during the current cost-of-living squeeze.
Sheldon Mills, executive director of consumers and competition at the FCA, said: "While many firms did well in supporting customers in difficulties during the pandemic, with our support and guidance, others sadly failed their customers.
"Given the current cost of living challenges, it’s vital that the sector continues to learn lessons to make sure they support struggling customers.
"We will take action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly."
