Call for Banks to extend support to vulnerable customers

New research by Fair4All Finance has found that the unprecedented support from banks and the regulator significantly helped customers during Covid-19, with no detrimental impact on bottom lines.

The research conducted with Lloyds Banking Group, NatWest Group and Yorkshire Building Society looked at the response of major banks and building societies during Covid-19. The aim was to understand the impact of support measures like payment holidays and interest-free overdrafts on customers and the financial institutions themselves.

The research found that many of the lessons learned can support financial institutions in the way they treat their customers and help people in vulnerable circumstances weather current and future financial storms. Among the report recommendations are that banks, building societies and other lenders consider:

• Widening their credit options to support customers in financially vulnerable circumstances – many customers who are on low or flexible incomes need access to personal loans that are less than £1k and that can be repaid within 1 year
• Reintroducing an offer of a £500 interest-free overdraft to all customers who need it and where it would be appropriate for their circumstances
• Providing a wide and flexible support and forbearance offer including increased use of payment deferrals and interest holidays to customers facing financial difficulties
• Taking further steps to communicate with customers via their preferred communication channels using clear language and ensuring they are proactive in monitoring for early signs of financial stress or vulnerability at a customer level and not just a product level

Not all of the financial challenges faced during the current cost of living of crisis are the same as those faced during the pandemic and flexibility in how customers are supported is key.

Fair4All Finance says that many of the conclusions of the research are opportunities for systemic change that can support financial institutions in the way they treat their customers in line with forthcoming Consumer Duty regulations.

Sacha Romanovitch OBE, CEO of Fair4All Finance said “Banks went above and beyond to help customers during the pandemic without it being detrimental to their results. The current cost of living is creating financial pressures for millions of people. Banks have a real opportunity to offer tailored and new services to help those in financially vulnerable circumstances. The customer loyalty this can create is an opportunity that must not be missed.”