FCA published the results of a consumer survey amid pandemic and is urging consumers struggling to make repayments to speak to their lenders about options available to them. FCA conducted a survey on Vulnerability and Harms among more than 7,000 individuals during the pandemic. The survey found that 12 million people in UK had low financial resilience, indicating that they may struggle with bills or loan repayments. FCA has put in place a package of support for individuals in difficulty to ensure help is available after October 31, 2020.
Due to the impact of the pandemic, many of those who have experienced changes in employment and increased stress are now likely to have low financial resilience. These consumers are more likely to fall behind on payments. Nearly 36% of respondents who already had low financial resilience and had a mortgage said they are likely to fall behind on mortgage payments; 36% of those with loans or credit cards are worried about repayments on these; and 42% of renters are worried about falling behind on rent payments. Almost a third of the adults (31%) saw a decrease in income, with households seeing income fall by a quarter, on an average.
FCA has been working with firms to ensure support is given to consumers who are in financial difficulty because of the pandemic. Support will be available both to those who have previously taken a payment deferral and those who are newly in financial difficulty, considering the specific needs of vulnerable consumers. Firms should work with customers to provide support before they miss payments. Given that people may be impacted in different ways, firms should be flexible and offer a full range of shorter and longer-term options, tailored to reflect customers’ individual circumstances. This could include:
- Suspending, reducing, waiving, or cancelling any further interest or charges
- Permitting the customer to make no or reduced payments
- Agreeing on a repayment plan
Tailored support is also available to overdraft customers who are struggling financially due to COVID. Firms should also treat customers fairly, for example, by not repossessing homes when customers are in lockdown and cannot access alternative accommodation. For consumers who have previously taken a payment deferral, firms should offer a range of options for repaying the missed payments. While these measures are designed to help during this difficult time, some may result in increased costs in the longer term. If a consumer can afford to continue making payments, it is in their best interests to do so. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
Keywords: Europe, UK, Banking, Insurance, Securities, COVID-19, Payment Deferrals, Credit Risk, FCA
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