UK Regulators Fine Barclays $31 Million For Poor Treatment Of Credit Customers

The U.K.’s Financial Conduct Authority (FCA) has fined Barclays £26 million ($31.6 million) for its treatment of consumer credit customers who fell into arrears on their loans or experienced other financial difficulties.

The British watchdog agency imposed the fine on Barclays Bank UK plc, Barclays Bank plc and Clydesdale Financial Services Limited (Barclays).

“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,” said Mark Seward, the FCA’s executive director of enforcement and market oversight, in a statement.

The FCA said Barclays has been proactive in redressing the matter by paying approximately £273 million to over 1.53 million customer accounts since 2017.

The agency added that Barclays had identified problems with its treatment of certain credit customers as early as 2014, but failed to address them because of internal control failures. Barclays has since instituted a program to compensate affected customers, which the FCA has been monitoring.

The FCA said the inappropriate behavior took place between April 2014 and December 2018, during which time Barclays failed to follow its contact policies for customers who fell into arrears. The bank also failed to have appropriate conversations to help customers understand why they were in arrears and to “properly understand customers’ circumstances leading it to offer unaffordable, or unsustainable, forbearance solutions.”

“The FCA found that Barclays failed to treat customers fairly or to act with due skill, care and diligence,” the agency added in a statement.

According to the FCA, Barclays did not dispute its findings. The agency also took the bank’s redress program into consideration when setting the fine, which entitled Barclays to a 30 percent discount. Without the discount, Barclay’s fine would have been £37,223,500.

In May, following an FCA report on the issue, banks in Britain started looking into whether they pressed businesses into giving them more work in exchange for loans amid the pandemic. Lenders, including Santander, Deutsche Bank, Barclays and HSBC, were said to be holding internal probes to determine whether their investment bankers sought to connect crisis funding to more remunerative offerings, according to the Financial Times.

Earlier this year, U.K. government officeholders and companies chastised financial institutions for requiring personal guarantees for emergency loans that are backed by the state. The mandate puts much of the risk of the loan souring on the owner of the company instead of on the institutions, the BBC reported in March.