Banks must improve treatment of struggling small business borrowers

It comes after a review of 11 banks’ collections practices identified a number of issues, such as lenders not treating small companies fairly when they try to agree a sustainable payment plan. This could involve, for example, arranging payment plans which are clearly unaffordable based on the information provided by the customer. 

Staff also don’t have the right training to provide effective support to customers and make fair decisions about cases, while lenders don’t have clear policies to help staff identify and support vulnerable customers. 

Finally, banks don’t have quality assurance and testing for their processes to ensure they deliver fair results for consumers - this can mean problems going undetected. 

And while the FCA provided feedback to the individual firms it reviewed, it wants to see the whole sector take action. As such it has written to the chairs of all retail banks with small business customers. 

This letter tells the boards of these banks to ensure they’re meeting the FCA’s expectations and to inform the regulator if they’re unable to do so. It set out a list of expectations that it wants these banks to review. 

This includes, where borrowers are treated as if they have a regulated credit agreement, firms should be able to demonstrate they’re meeting these standards, and that policies and procedures are clear with adequate information to support staff to make judgements when required. 

Firms should also be able to accurately maintain records and be able to use such records to test whether they’ve delivered fair outcomes, and should be capable of producing customer records without gaps in a timely manner. In addition to this, the management of third parties should be subject to a suitable risk framework that ensures fair treatment of SMEs. 

Alongside this, it’s encouraging all firms to carry out both quality assurance and customer outcomes testing for customer processes. This assurance should follow a holistic approach so the customer’s overall outcomes are understood and these are assessed for fairness. 

Staff should also receive suitable training that equips them to effectively support SME customers to receive fair outcomes during collections and recoveries. 

In addition to this, senior management should receive effective management information that allows for a holistic oversight of SME customer treatment during collections and recoveries. 

Alongside this, senior managers responsible for collections and recoveries should have suitable levels of awareness and oversight of SME customers matters including treatment during collections and recoveries. 

Commenting on this news, the FCA’s executive director of consumers and competition Sheldon Mills said: “People across the country will be affected by the rising cost of living - and this includes small businesses. We were disappointed to find repeated instances of these customers not being treated fairly by banks when they’re struggling. 

“We expect the whole sector to act quickly to improve this. We will take action if problems continue.”