In a record-breaking move from the Financial Conduct Authority, Barclays has been ordered to pay £26m for poor treatment of customers.
The FCA has warned other lenders over the treatment of borrowers facing financial hardship in the wake of the Covid crisis, following the revelation that Barclays mistreated over 1.5 million business and personal customers who fell behind on repayments.
According to the City regulator, the bank failed to consider individual circumstances and did not properly contact those who had fallen into arrears, eventually offering unaffordable payment plans.
This resulted in many prioritising their debt to Barclays above other crucial financial responsibilities, such as their mortgage or rent.
Some of the customers were facing financial difficulties due to recent bereavement.
The FCA was clear that this constitutes mistreatment, and hit Barclays with the biggest fine they have ever issued in response.
They also said that Barclays “failed to treat customers fairly or to act with due skill, care and diligence”.
In an apology statement, the bank said:
“Barclays is a responsible lender and we strive to achieve good outcomes for our customers.
Since the issue was first identified, we have implemented a number of changes to our customer journeys, systems processes and colleague training to correct it, and the vast majority of customers who were impacted have already been contacted.
We would like to apologise to those customers for not providing the level of service we should have.”
In an effort to prevent such mistreatment happening again, banks and lenders are working with HM Treasury to create a new standard for handling payment plans for government-funded loans for small businesses, but there are concerns that such standards may not extend to other forms of debt, such as personal loans.
The Covid crisis has exacerbated this concern, with research from StepChange, a debt charity, showing that arrears have soared by 66% since May and that the number of people in severe debt has nearly doubled to 1.2 million as people have taken on short term loans.
As it stands, the collective amount of debt reaches £10.3bn, but 3 million are thought to be at risk of falling into arrears and inflating this figure still further.