Banks and building societies would be required to help customers struggling to repay their mortgages and loans as interest rate rise in a cost-of-living crisis, Britain's financial watchdog said in proposals to make COVID-era temporary rules permanent.
The Financial Conduct Authority introduced temporary guidance to mortgage, consumer credit and overdraft providers as the COVID-19 pandemic unfolded in 2020 and the economy went into lockdown.
Firms should offer appropriate support to all customers experiencing financial difficulty such as directing them to free debt advice, the FCA said in a public consultation paper issued on Thursday.
"Many firms have been following our temporary guidance, developed during the pandemic, to support borrowers in tough times. Our proposals today will help ensure this continues," said Sheldon Mills, FCA executive director for consumers and competition.
"Where we see firms not providing the right support, we will act quickly to put this right."
The FCA said last week that millions of British borrowers repeatedly missed payments on bills in the six months to January amid the steep surge in inflation and interest rates.
The FCA said it has also secured up to 47 million pounds ($59.32 million) of redress from 17 lenders for over 195,000 customers for failures in supporting customers in difficulties.
The FCA said it identified harms such as not providing forbearance to customers at risk of payment difficulties before they miss a payment, not effectively engaging with customers and not tailoring forbearance options to individual circumstances.
The public consultation on making the temporary guidance permanent closed in July and the watchdog said it expects the new rules to come into force in the second half of 2024.
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