The authority praised firms which have improved practices, placed greater emphasis on the need to treat customers fairy and identified areas which the industry should now focus.
Clive Adamson, director of supervision at the FCA, said: “Lenders need to treat customers in financial difficulty fairly. We want firms to take further action to strengthen their arrears management practices and invest in their systems and people to make sure that they get this right.
“We are already working with firms and trade bodies to help them embed a culture centred on delivering the best outcome for customers based on their specific circumstances.”
The regulator has asked lenders to take action to identify customers who are susceptible to arrears if interest rates rise and said they should have appropriate strategies to treat them fairly.
The report called on firms to support and empower front line staff while also providing greater flexibility in their practices that support tailored outcomes for borrowers.