FCA tells banks to improve treatment of struggling small business borrowers

As part of its work in response to the increased cost of living, the FCA has told banks they must treat small business customers fairly when collecting and recovering debts.

A review of 11 bank’s collection practices identified a number of issues, including:

  • Lenders not treating small businesses fairly when they try to agree a sustainable payment plan – for example, arranging payment plans which are clearly unaffordable based on the information provided by the customer.
  • Staff not having the right training to provide effective support to customers and make fair decisions about cases.
  • Lenders not having clear policies to help staff identify and support vulnerable customers – meaning these customers may be missing out on the support they need.
  • Not having quality assurance and testing for their processes to ensure that they deliver fair results for consumers - this can mean problems going undetected.

The FCA has provided feedback to the individual firms it reviewed. However, it wants to see the whole sector take action. It has written to the chairs of all retail banks with small business customers. The letter tells the boards of these banks to ensure that they are meeting the FCA’s expectations and to inform the regulator if they are unable to do so.

Sheldon Mills, the FCA’s Executive Director for Consumers and Competition, 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.'

Notes to editors

  1. SME collections and recoveries review

  2. Dear Chair letter to firms

  3. Our review covered SME customers with BAU and BBLS lending that fell within the consumer credit act definition of a 'relevant recipient of credit'. This meant they were borrowing £25,000 or less and a sole trader, small partnership or other relevant business type as described within the act.

  4. Our expectations in the Dear Chair letter are based on our existing principles, rules and guidance, which we are applying to ensure that firms act in their customers’ interests. Later this year, we will finalise any rules in relation to the Consumer Duty, but we are not waiting for the Duty to come in before we act to improve consumer outcomes.