On 15 December 2020, the FCA issued a fine of £26,056,400 (after a 30% discount under the FCA's settlement procedures) against Barclays Bank UK PLC, Barclays Bank PLC and Barclays' Clydesdale Financial Services Limited (together, "Barclays") for failing to show forbearance and due consideration to business and retail customers when they fell into arrears or experienced financial difficulties.
This is a particularly pertinent message from the regulator at a time when lending firms are balancing the FCA's COVID-19 guidance for consumer credit customers with the constraints of a prescriptive and somewhat cumbersome consumer credit regime. The conduct at the heart of the Barclays' matter arises from pre-COVID-19 times. However the regulator has used this fine to remind firms of the importance of their obligations towards customers during in these uncertain times.
The FCA considers that between April 2014 and December 2018, Barclays breached Principles 6 and 3 of the FCA's Principles for Business and certain Consumer Credit rules in the following ways:
- Customer contact: Barclays failed to follow its customer contact policies in relation to various product areas, resulting in customers experiencing delays in being contacted by telephone by Barclays service agents and therefore incurring additional fees and charges;
- Customer circumstances: Barclays service agents failed to have appropriate conversations with customers to assist them in understanding the reason(s) for the arrears or the customers' financial situations. This led to Barclays missing crucial indicators of financial difficulty or vulnerability in a number of customer cases; and
- Forbearance: As a result of Barclays' failure to properly understand a number of its customers' circumstances, it offered customers forbearance solutions which were often unaffordable or unsustainable.
Barclays identified around 1.5m customers who suffered or were at risk of suffering detriment as a result of its failings, and has proactively paid over £273,000,000 in redress to these customers.
Through the Final Notice published, the FCA reminds lenders that its rules under the Principles of Business and Consumer Credit handbooks require firms to show forbearance and due consideration to any customers who are in arrears or experiencing financial difficulties. This is of particular importance given the challenges consumer credit customers are facing as a result of COVID-19. This means that lenders must ensure that they:
- take adequate measures to properly understand a customer's financial position, both in the short and long-term;
- consider whether the customer may be vulnerable due to unemployment, relationship breakdown, bereavement, or illness; and
- offer affordable and sustainable forbearance solutions which are tailored to each customer's personal circumstances – this may involve suspending or reducing interest or charges, allowing deferment of payment of arrears or accepting token or reduced payments for a reasonable period of time.
Author: Emily Lemaire
