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    FCA Proposes Further Support to Borrowers Impacted by Pandemic

    November 04, 2020

    FCA proposed to enhance the measures for borrowers affected by COVID-19 after October 31, 2020. It proposed to extend payment deferrals and other support being provided to personal loans, credit cards, motor finance, rent-to-own, buy-now-pay-later, and pawnbroking customers who are experiencing payment difficulties. The proposals will mean that those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total and those who have availed an initial payment deferral will be eligible for a further payment deferral of up to three months. Borrowers would have until January 31, 2021 to request an initial payment deferral. FCA is asking for comments on the proposed measures by November 06, with the final guidance expected to be published as soon as possible after the comment period closes.

    High-cost, short-term credit consumers, such as those with payday loans, who have not yet had a payment deferral would be eligible for a payment deferral of one month. Consumer credit customers who have already benefitted from two payment deferrals (or one for HCSTC) and are still experiencing payment difficulties should speak to their lender who will be able to provide tailored support. This also applies to those who have resumed repayments after an initial payment deferral, as they would not be entitled to a further deferral, but should receive tailored support if they are experiencing payment difficulties. FCA is urging consumers not to contact their lender until the enhanced measures are in place. 

    A payment deferral under the FCA proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions. Tailored support may be reported on a borrower’s credit file and lenders should inform borrowers where this will be the case. FCA is working closely with trade bodies and lenders to ensure that the enhanced measures come into effect as soon as possible and the consumers receive the information they need. Firms will also continue to offer tailored support to overdraft borrowers, as set out in September 2020. This could include reducing or waiving interest, agreeing on a program of staged reductions in the overdraft limit and transferring the overdraft debt to an alternative credit product on more favorable terms. Premium finance consumers will continue to benefit from the tailored support announced on October 30, 2020. FCA will continue to keep the support available to consumers under review.

    FCA also finalized the guidance sets out measures to help customers who hold insurance and premium finance products and who continue to face financial difficulties because of COVID-19 crisis. The guidance, which was proposed in October 2020, sets expectations that firms provide tailored support to customers who have already had a payment deferral and those newly in financial difficulty due to changed circumstances relating to coronavirus. This guidance comes into force on November 01, 2020 and remains in force until varied or revoked. This guidance applies to regulated firms operating in the insurance and regulated credit premium finance markets, including insurers, insurance intermediaries, premium finance lenders that provide credit to fund the payment of insurance premiums in instalments, premium finance brokers that carry on regulated activities relating to credit granted for the purposes of financing insurance premiums in instalments, debt collectors, and other firms that may be involved in insurance arrangements and/or the provision of premium finance. The guidance also applies to all non-investment insurance contracts—that is, general insurance and protection contracts—while it does not apply to re-insurance products.

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    Comment Due Date: November 06, 2020

    Keywords:  Europe, UK, Banking, Insurance, COVID-19, Payment Deferrals, Credit Risk, FCA

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