Britain's financial watchdog has issued a warning to UK's 3,500 lenders and consumer credit providers that too little support is being provided to those hardest hit by soaring inflation and rising interest rates.
The Financial Conduct Authority suggested banks should take into account similar measures that were recommended during the pandemic, including debt help and "tailored forbearance" such as loosening repayment rules on borrowed funds.
Several buy-now-pay-later companies received the FCA letter, despite not being regulated.
FCA said it added non-authorised firms to its list of companies to encourage them to offer their customers an "appropriate level of care and support".
The letter said, "We expect to see higher demand for credit, although rising interest rates, and lower disposable income, may make borrowing less affordable, or unavailable, for some".
The FCA letter noted firms will likely see a broader group of consumers struggling financially, who will struggle to pay their bills and that they may be vulnerable or experiencing financial difficulty for the first time.
Borrowers should be encouraged to use free debt advice while making sure that any fees and charges levied on borrowers are fair and cover only the firm's costs.
According to ratings agency Moody's inflation in high-single-digit territory and interest rate hikes next year could pose a financial threat to 13% of UK mortgage borrowers.
It has also been estimated by the Institute of Fiscal Studies that the poorest households could face inflation rates of up to 14%, since a greater proportion of their budgets goes on energy and food.
Currently, just over a quarter of the population has low financial resilience, but the FCA predicts in its letter that the number will increase next year.
The FCA letter stated that more serious failings were found at over 30 financial institutions in the UK, mostly in the consumer credit market.
"Early action is important for those struggling with debt," said Sheldon Mills, executive director of consumers and competition at the FCA.
"We need all firms to get the basics right and provide good quality support. Where we see more serious wrongdoing, we are already acting to ensure these firms improve."