FCA updated two sets of guidelines setting out enhanced support that should be available to mortgage borrowers and consumer credit customers experiencing payment difficulties as a result of COVID-19 pandemic. FCA has confirmed that firms will continue to offer tailored support to borrowers. The guidance for consumer credit customers covers users of personal loans, credit cards, store cards, catalog credit, rent to own, buy now pay later, pawnbroking, motor finance, and high-cost, short-term credit. The guidance for mortgage borrowers has been in force from November 20, 2020 while the guidance for consumer credit customers has been in force November 25, 2020. FCA also published a statement (FS20/18) that summarizes feedback received to the draft guidance for consumer credit customers, which that was proposed in November 2020.
FCA reiterates that consumers should keep up with payments on their mortgage and loans or credit products if they can afford to do so and should only seek support where such support is absolutely necessary. FCA has also provided more details about which groups of consumers will and will not be able to access payment deferrals:
- Those who have not yet had a payment deferral will be eligible for payment deferrals of six months in total.
- Those who have a payment deferral will be eligible to apply for a further deferral as long as the total length of deferrals does not exceed a maximum of six months in total.
- Those who have previously had payment deferrals of less than six months will be be eligible to apply for a further payment deferral as long as total deferrals do not exceed six months.; this includes those receiving tailored support and those who are behind on payments.
- Borrowers who have already had six months of payment deferrals will not be eligible for a further payment deferral. Firms will provide tailored support appropriate to their circumstances, which may include the option to defer further payments.
- High-cost, short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of one month.
Consumers will have until March 31, 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to July 31, 2021, provided these extensions cover consecutive payments and are subject to the maximum six months allowed. Borrowers who have not yet taken a deferral, and who think they need the full six months should apply in good time before their February 2021 payment is due. A payment deferral under the finalized guidelines would not be reported as missed payments on the credit file of a borrower or consumer. However, any payment deferrals offered as tailored support could be recorded on a the credit file of a borrower; lenders should inform borrowers where this is the case. In October, FCA had issued a separate guidance for borrowers with interest only or part-and-part mortgages whose capital repayment plans were affected by the crisis. FCA has confirmed that these borrowers can access payment deferrals after maturity without this affecting their ability to delay the capital repayment.
- Press Release on Support for Mortgage Borrowers
- Press Release on Support for Consumer Credit Customers
- Guidance on Mortgages Payment Deferrals (PDF)
- Guidance on Mortgages Tailored Support (PDF)
- Updated Interest-Only Guidance (PDF)
- Guidance for Consumer Credit Customers
Keywords: Europe, UK, Banking, COVID-19, Payment Deferrals, Consumer Credit, Credit Risk, FCA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleEBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.