The FCA has confirmed measures to ensure that firms provide tailored support for users of certain consumer credit and overdraft products who continue to face payment difficulties due to coronavirus (Covid-19).
The guidance will cover users of credit cards and other revolving credit (store card and catalogue credit), personal loans, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products and overdrafts.
The measures apply both to consumers who have benefited from support under the current guidance and continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends on 31 October.
Christopher Woolard, interim Chief Executive at the FCA, said: “For those who can restart payments, it is in their best interests to do so. However, for those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local or national responses to the crisis. There should be no ‘one size fits all’ approach taken by firms to help consumers get back on track.”
The FCA expects firms to:
- Recognise 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.
- Work with customers approaching the end of a payment deferral to provide support before they miss payments.
- Be flexible and employ a full range of shorter and longer-term options to support their customers and minimise stress and anxiety experienced by customers in financial difficulty.
- Give customers time and opportunity to repay and do not pressurise 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 customers’ 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.
- Recognise and respond to the needs of vulnerable customers.
Additionally, the 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 programme 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 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.
Where consumers require further support from firms, either at the end of payment deferrals under the guidance, or where they need support for the first time, this will be reflected on credit files in accordance with normal reporting processes. This will help ensure lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms should be clear about the credit file implications of any forms of support offered to consumers.
The FCA’s current guidance published in July will continue to ensure temporary support for those impacted by coronavirus until 31 October 2020. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after 31 October.
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. The 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.
If the FCA were to consider broadening the application of the guidance beyond the exceptional circumstances arising from coronavirus or amending our Consumer Credit sourcebook (CONC), this would be undertaken with full public consultation and an appropriate cost-benefit analysis.
The guidance comes into force on 2 October.