The fine was given to Barclays Bank UK PLC, Barclays Bank PLC and Clydesdale Financial Services Limited (Barclays).
Barclays has redressed these customers, paying over £273m to at least 1,530,000 customer accounts since 2017.
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The redress programme is close to completion.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Consumers should feel reassured that their lender will work with them to help resolve any financial difficulties, whereas Barclays’ 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.”
Between April 2014 and December 2018 some retail and small business customers who had been offered consumer credit were treated poorly when they fell into arrears.
The FCA requires consumer credit firms to take adequate measures to properly understand customers’ financial difficulties.
It also requires firms to show forbearance and due consideration to customers in arrears or in financial difficulties.
Otherwise, a customer under financial pressures could end up making payments on a consumer credit loan at the expense of a priority debt, such as a mortgage.
Barclays identified some of the problems as early as 2014, but due to systems and controls failings these were not fully rectified.
Adequate measures to resolve the problems were subsequently taken according to the FCA.
Barclays has contacted all customers whom they think may be due for compensation which the FCA has been monitoring.
The FCA took the redress programme into account when setting the fine.
Barclays did not dispute the FCA’s findings and agreed to settle the case.
As a result, they qualified for a 30% discount and the financial penalty would otherwise have been over £37m.
The fair and appropriate treatment of customers experiencing financial difficulty remains a focus for the FCA and the authority says it is working to ensure that firms raise their standards in this area.
The FCA emphasised that it recognises the challenges firms face in this area due to the coronavirus pandemic, which only heightens the importance of firms treating customers in financial difficulty fairly and appropriately.