1st July 2020
The FCA has today published its updated guidance for credit cards, revolving credit, personal loans and overdrafts relating to the coronavirus pandemic.
The guidance comes into force on 3 July; note however that it does not apply to other types of consumer credit lending including motor finance, rent to own, high cost short term credit and pawnbroking, which will be the subject of a separate guidance consultation to follow.
The guidance outlines the requirements on lenders to provide further support to customers who are experiencing repayment difficulties as a result of the pandemic.
The key message is that customers who have taken a payment holiday in line with the FCA’s original guidance back in April should return to full or partial repayments if they can afford to do so. If not, however, further measures are provided to support them.
These include enabling customers to request a further 3 month £500 interest-free overdraft on their main personal current account or a further 3 month payment holiday.
Customers who have not yet had a payment holiday or an arranged interest-free overdraft of up to £500 but who are experiencing temporary financial difficulty due to coronavirus can request one up until 31 October 2020, after which date the ‘window’ for requests will close. However it may be appropriate for firms to offer further periods of reduced or token payments after that date for customers still facing financial difficulties in line with existing regulatory requirements under CONC 7.
Lenders should contacts customers coming to the end of an existing payment holiday to establish their position. Where the customer does not respond, firms are able to proceed on the basis the customer is able to resume repayments, but where the first payment due is missed or the customer indicates they unable to meet this payment, firms should offer further support as appropriate.
The FCA has also confirmed that:
As under the original guidance the FCA has provided that any payment deferral offered in accordance with the revised guidance should not have a negative impact on the customer’s credit file; however it has also stressed that customers should be aware that credit records with Credit Reference Agencies (CRAs) are not the only source of information which lenders can use to make lending decisions. The FCA has acknowledged that this approach creates a tension and risks adversely impacting the integrity of the CRA data, leaving the door open to further debate on this issue.
The position on post-contractual notices is also unchanged: where payments are missing in accordance with the FCA guidance Notices of Sums in Arrears will be triggered unless the agreement has been modified or varied. If the firms reasonably considers that documentation risks confusing the customer, the firm must provide contextual information to reduce that risk. The FCA has reiterated, however, that it will take into account the circumstances of any breaches of CCA requirements and resulting consumer detriment when making regulatory decisions.
Lenders should act now to: