The UK’s financial watchdog has ordered bank bosses to improve their handling of debts of small business customers, including emergency loans issued during the Coronavirus pandemic.
Responding to the surge in inflation that is placing consumers and small firms under increasing pressure, the Financial Conduct Authority (FCA) reviewed 11 banks’ management of SMEs in financial difficulty and found repeated instances of poor service and failures to treat customers fairly. This included “where relevant” the handling of government-backed pandemic support provided through the Bounce Back Loan Scheme (BBLS).
Failings included gaps in policies and procedures; inadequate staff training; systems and procedures that make it difficult to deliver fair outcomes; and poor record keeping. This led to breakdowns in identifying vulnerable customers, and inadequate provision of suitable forbearance options to those struggling with repayments.
The City regulator is now calling on the entire sector to rectify this, adding that it will take further action if problems continue.
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“We have written this letter to all chairs of retail banks with SME customers to make sure the issues we raise are given the appropriate attention at both board and executive level,” the FCA said. “We expect the board to ensure the issues identified are considered and, where necessary, addressed promptly.”
The FCA added: “Where customers have been adversely impacted as a result, we would expect your firm to put things right.”
The regulator said frontline staff were often not given training to deal with customers in financial difficulty yet were still required to decide on making a referral to a specialist team. In addition to staff lacking sufficient experience to correctly judge whether a referral was needed, there was also evidence of “staff not considering or acting on information provided to them by customers”.
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There were also instances where referrals did not go through because of inadequate systems or procedures, resulting in a failure to receive specialist support or lengthy delays before support was provided.
“We continue to monitor outcomes and carefully scrutinise firms in this sector and will use our supervisory and enforcement powers to take further action as necessary,” the regulator said.
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