FCA has published additional guidance for firms in relation to the mortgage payment deferrals, with the guidance becoming effective on September 16, 2020. The additional guidance sets out how firms should provide tailored support to mortgage borrowers who have benefited from payment deferrals under the current guidance and who continue to face financial difficulties as well as to mortgage borrowers whose financial situation may be newly affected by COVID-19 after the current guidance ends. The existing guidance, which was published in June 2020, will continue to provide support for those impacted by COVID-19 until October 31, 2020. FCA also published a statement (FS20/14) that summarizes feedback received to the additional guidance that was proposed in August 2020.
The additional guidance stipulates that firms will offer further short and longer-term support options to reflect the specific circumstances of their customers. This could include extending the repayment term or restructuring the mortgage. Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. The guidance requires firms to prioritize support for borrowers who are at most risk of harm or face the greatest financial difficulties. Firms are also required to provide borrowers with the support they need in managing their finances (including through self-help and money guidance) and refer borrowers to organizations that can provide free debt advice if this meets their needs and circumstances.
In case borrowers require further support from lenders, either at the end of payment holidays under the FCA guidance or where they are in need of support for the first time, these further arrangements can be reflected on credit files in accordance with normal reporting processes. This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers, instead of adopting “one size fits all” solutions. FCA will monitor firms to ensure that borrowers are treated fairly with regard to their individual circumstances. The June guidance is due to expire on October 31 and FCA does not intend to extend the guidance. This additional guidance ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or if they are newly affected by COVID-19 after October 31. However, FCA will keep the guidance under review and, if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.
Keywords: Europe, UK, Banking, COVID-19, Payment Deferrals, Regulatory Capital, Credit Risk, FCA
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