FCA finalized additional guidance for firms in relation to the consumer credit products and overdrafts, with the guidance becoming effective on October 02, 2020. The guidance intends to ensure that firms provide tailored support for users of certain consumer credit and overdraft products who continue to face payment difficulties due to COVID-19 pandemic. The guidance covers users of credit cards and other revolving credit (store card and catalogue credit), personal loans, motor finance, buy-now pay-later, rent-to-own, pawnbroking, and high-cost, short-term credit products and overdrafts. FCA also published a statement (FS20/15) that summarizes the feedback received to this additional guidance that was proposed in September 2020.
The guidance applies both to consumers who have benefited from support under the current guidance and continue to face financial difficulties as well as to customers whose financial situation may be newly affected by COVID-19, after the current guidance ends on October 31, 2020. FCA expects firms to:
- Recognize the uncertainties and challenges that many customers will face in the coming months as the crisis develops and provide tailored support, which reflects their individual circumstances
- Be flexible and employ a full range of shorter and longer-term options to support their customers and minimize stress and anxiety experienced by customers in financial difficulty
- Give customers time and opportunity to repay and do not pressurize them into repaying their debt within an unreasonably short period of time
- Put in place sustainable repayment arrangements which are affordable and take account of their customers’ wider financial situation including their other debts and essential living expenses
- Prevent customer balances from escalating once they have put in place a repayment arrangement by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen
- Recognize and respond to the needs of vulnerable customers
FCA will monitor how firms apply the guidance to ensure borrowers are treated fairly, with regard to their individual circumstances. Customers should be given time to consider their options and to seek debt advice (if necessary) before deciding on the support they take. Additionally, FCA has confirmed that it expects firms to contact overdraft customers who have received temporary support to determine if they still require assistance. Where a customer needs further support or where a newly affected customer gets in touch asking for help, firms should provide tailored support such as reducing or waiving interest, agreeing a program of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt. The guidance sets out when these options may be appropriate. The guidance will be kept 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. FCA will also review this guidance within six months of it coming into effect to determine whether it remains relevant given the coronavirus crisis or whether it needs to be amended, withdrawn, or replaced.
Effective Date: October 02, 2020
Keywords: Europe, UK, Banking, COVID-19, Credit Risk, Consumer Credit, Overdraft, Payment Deferrals, 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 ArticleESMA Responds to EC Consultation on Green Bond Standard
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.