The impacts of COVID-19 on the lending industry

During the pandemic, the Financial Ombudsman has been swamped, reporting a 60% rise in the number of fraud and scam complaints alone.

While the pandemic has greatly impacted consumers and their borrowing habits, it’s also forced lenders and regulators to re-evaluate their practices and find more efficient ways to operate.

  • Flexible lending

COVID-19 has seen lenders facing funding pressures, as well as consumers unable to repay what they’ve borrowed. Many lenders have introduced payment holidays, deferrals, and more flexible terms – as instructed by regulators.

The fact lenders have been able to be more lenient and flexible, while remaining financially sound, suggests that more flexibility is something that can be built into agreements in the future. We expect to see an evolution of lending options, expanding to meet consumer’s needs, and offering them a wider selection of choices.

  • Improved customer service facilities

Companies have been prompted to enhance their customer service offering, and bring more empathy to their interactions. Initiatives like video customer service and online assistance have been vital for customers to feel supported. This has enabled customers to maintain trust with lenders during uncertain times — a valuable bi-product which we expect to be fully embraced in the ‘new normal’.

  • Digital innovation

With face-to-face meetings near impossible during lockdown, the lending industry has adapted to a digital-first model. Although this is a great development, and something that will be useful moving forward, it does also come with its own set of challenges.

Some lenders aren’t keen on the idea of digital financial services, not to mention the sector already being so susceptible to online fraud. Monitoring for security risks and ensuring clear communication with borrowers will be incredibly important for lenders operating digitally.

  • Cautious consumers

The pandemic has been a difficult time for many, so naturally consumers are being more cautious with their spending habits and their choices when it comes to financial lending.

Fully understanding the terms of lending agreements and being able to spot the signs of mis-selling will be even more crucial for borrowers moving forward.

Anyone who took out a loan or financial agreement during the pandemic and might be worried about mis-selling can contact our team of experts for help.

Call 01615 180980 or email [email protected] and we will get in touch as soon as possible.

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