British Financial Watchdog Cracks Down on Unfair Lenders

The U.K.’s top financial watchdog is giving banks in that country an ultimatum: treat customers struggling with Britain’s cost-of-living crisis fairly, or be barred from lending.

In a report issued Thursday (Nov. 3), the Financial Conduct Authority said it found that only 30% of the lenders it studied had “sufficiently explored customer’s specific circumstances, which meant repayment agreements were often unaffordable and unsustainable.”

The authority said in a news release that it has ordered 32 lenders to make changes to how they treat customers. Seven of these firms have agreed to pay 12 million pounds ($13.5 million) in compensation to close to 60,000 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,” Sheldon Mills, the FCA’s executive director of consumers and competition, said in the release.

“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.”

Those financial difficulties are getting more and more severe. This week saw reports that food inflation in the U.K. had risen to a record annual rate of 11.6% for October, leaving people paying more for staples such as tea and sugar, as well as fresh foods.

As PYMNTS noted last month, the U.K.’s GfK Consumer Confidence Index — which assesses people’s overall financial situation and general feelings about the economy — has been on a near-continuous downward trend. In September, the index dropped to an all-time low of -49, marking the fifth successive month during which the metric reached a new bottom.

This news comes two days after reports that England’s four largest banks have seen a surge in income in the wake of interest rate hikes by the country’s central bank.

As PYMNTS reported, this has led some U.K. politicians to call for these banks to pay a windfall tax to help close the country’s budget gap — along the lines of the proposed bill in Spain for a 4.8% levy on banks’ net interest income.

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