Barclays hit with £26m fine over poor treatment of indebted borrowers

Barclays has been hit with a £26million fine by regulators after four years of poor treatment of customers who fell behind on their borrowing.

The Financial Conduct Authority said business and personal customers who fell into arrears on their borrowing between April 2014 and December 2018 were not properly contacted by the bank.

It added that the banking giant failed to help customers understand why they had fallen into arrears and had offered unaffordable or unsustainable ways out of debt.

Lenders are required to take measures to properly understand customers’ financial difficulties and show forbearance and due consideration to customers in arrears or financial trouble.

Otherwise, those facing financial pressures could end up making payments on a credit card or personal loan at the expense of a priority debt, such as a mortgage, council tax, child support and utility bills.

The FCA said the bank, which accepted its findings, could have been charged up to £37.2million for its treatment of customers if it had not paid out more than £273million to 1.53million borrowers over the last three years in its own programme of redress and settled the case.

All customers who are due compensation have been contacted, the regulator said.

The regulator’s executive director of enforcement, Mark Steward, said: ‘Consumers should feel reassured that their lender will work with them to help resolve any financial difficulties, whereas Barclays’s poor treatment of its customers risked making these difficulties worse.

‘Firms must treat consumer credit customers fairly, including when they find themselves in arrears. We will take action against unfair treatment, or where firm systems expose customers to the risk of unfairness.

‘While this case predates the pandemic, this message is especially important as the impact of coronavirus continues to affect household incomes and budgets.’

Barclays had handed out over 640,000 holidays to borrowers worldwide since March, according to its latest results. 

As of the end of this September, £4.4billion worth of UK mortgages and £100million of credit card balances remain on payment holidays.

Across all major UK lenders, the number of mortgage holidays still in place had fallen to 127,000 by 20 November and the number of credit card holidays to 55,000, according to the trade body UK Finance.

Those who have not yet had a full six-month payment holiday can still apply for one up until the end of next March, while those who have were urged by UK Finance to contact their lender.

Barclays said in a statement: ‘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.’

HSBC also refunds badly treated borrowers  

Meanwhile an undisclosed number of HSBC, First Direct, M&S Bank and John Lewis Finance borrowers who found themselves in arrears over the last decade are receiving payouts through the post – but this is not as part of an FCA probe.

The news has so surprised some recipients, many of whom are no longer with the bank, that they have wondered if the letters are a scam.

One man, Nick Redman, tweeted at the end of last month: ‘Just got a £25 cheque out of the blue from HSBC. I haven’t banked with them for around 6 years and they’ve somehow got my new address which I only moved to in August. I’m confused now.’

HSBC is also sending cheques of up to £100 to customers who fell into arrears between 2019 and 2019 – some of whom have not been with the bank for years 

However HSBC, which runs all four banks, said an internal review found customers in arrears had received poor service between 2010 and 2019 and would be sent cheques of between £25 and £100 as a goodwill payment.

Anyone who is due compensation will be contacted and sent a letter in the post along with the cheque.

The bank said in a statement: ‘We always strive to do the right thing by our customers. Regrettably, some historic cases where customers were in arrears at times fell short of this commitment.

‘We are taking action to put that right and remediate customers who may have been impacted. Customers do not need to do anything.’