Some actions by lenders have the “potential to lead to significant harm to borrowers in financial difficulty,” according to the regulator.
The FCA highlighted cases where ongoing payments made by borrowers are less than the accruing interest, which means customers who are unable to get on track could ultimately lose their homes.
The regulator said within the second charge market it had seen examples where a firm will accept ‘token payments’ from a borrower but “the long-term appropriateness” is not considered and “the implications of making payments at the level agreed are not adequately explained”.
Under the new rules, firms will need to avoid the “foreseeable harm” caused by an escalating balance, and help consumers to make effective, timely and properly informed decisions.
Lenders must also consider whether a loan is ‘fair value’ for customers, under the pricing element of the Duty.
The regulator added that firms need to consider whether pricing practices could result in a bad deal for a cohort of customers.
The FCA also outlined how different groups of consumers may be more at risk of harm, which firms should identify.
Consumers with characteristics of vulnerability may be more susceptible to receiving poor value, for example, the regulator said.
This means firms need to take extra care when dealing with consumers with characteristics of vulnerability.
