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Britain’s Financial Conduct Authority (FCA) told banks and insurers on Thursday to do more to help customers struggling with a cost of living crisis as it investigates 40 banks for dragging their feet.
Interest rates are increasing to quell decades high inflation, with energy, mortgage and food bills also rising faster than wages.
Sheldon Mills, the watchdog’s head of competition and consumers, said that in May over nine million people had too much debt, up by two million since 2020.
“We’ve told lenders that we expect them to support struggling customers, particularly as they have the data to spot the warning signs first,” Mills told a City & Financial conference.
“We have identified 30 firms that need to do more to help struggling customers and will investigate the activities of 40 more,” Mills said.
“While we will intervene where we see bad practice, I know that the majority are doing the right thing.”
There was also a risk of people not renewing insurance policies to save money, leaving themselves unprotected.
“The last thing you want is your roof leaking or a flood and you have no insurance during a cost-of-living crisis when your mortgage is going up,” Mills said.
The FCA on Thursday wrote to heads of insurers, saying they should help to avoid policy cancellations or consider waiving policy cancellation fees.
Mills said the watchdog was holding weekly discussions internally on fallout from the cost-of-living crisis given that over two million people on variable rate mortgages are seeing immediate increases to their borrowing costs.
Over three million customers have fixed rate deals that are due to expire in the next two years, meaning they face a big hike in monthly payments.
“We are monitoring developments closely and will be working with industry to ensure that consumers are treated fairly during this period,” Mills said.
People with savings should see greater nominal returns due to higher rates.
Mills said the FCA expected banks to explain clearly to the watchdog how they decide on the pace at which they pass on rate increases to savers.
(Reporting by Huw Jones; editing by Alison Williams and Mark Potter)