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    FCA Updates Guidance to Support Borrowers Affected by COVID-19 Crisis

    November 19, 2020

    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 FCA also published a statement (FS20/18) that summarizes feedback received to the draft guidance for consumer credit customers, which that was proposed in November 2020.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.

     

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

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