The COVID-19 pandemic is continuing to present challenges across the board with regional lockdowns, closures of “air-bridges” and talks of a second wave dominating media outlets at the present time. If the pandemic has brought certainty in one regard, it is that the future is more uncertain than ever.
In order to help provide further clarity at this challenging time, the FCA launched a Call for Input on 31 July. This followed the publication of its extended temporary guidance published earlier in the year to support consumers of mortgage and consumer credit products impacted by COVID-19. The Call for Input is specifically looking for views on the following areas:
- What should happen to consumers coming to the end of a second payment holiday / deferral under the current temporary guidance?
- Whether and under what circumstances any aspect of the current guidance should continue beyond its current deadline of 31 October?
- Whether alternative regulatory tools (e.g. amendments to the Handbook) should take the place of its current temporary guidance?
It is important to note that the FCA’s current temporary guidance comes to an end at the same point that the Government’s Coronavirus Job Retention Scheme (the Scheme) is due to close. We are already starting to see the unfortunate impact of the pandemic on unemployment figures as certain sectors hardest hit take action in advance of the closure of the Scheme. There is therefore a risk that the ending of the Government’s Coronavirus Job Retention Scheme could result in further job losses over the coming months and a greater number of individuals falling into financial difficulty requiring support.
In responding to this Call for Input, firms should have regard to this risk and also consider the following (a non-exhaustive list):
- Whether there are steps that can be taken in advance of customers getting into financial difficulty to assist customers (e.g. pre-emptive temporary reduction in payments);
- What other forbearance tools beyond payment holidays / deferrals may be appropriate for customers who are still in financial difficulty after six months (e.g. term extensions, interest freezes, temporary reduced payments etc);
- Whether there are any particular considerations for customers considered more vulnerable;
- The practical aspects of handling an increased volume of customers requiring support over the coming months (e.g. resource allocation within customer-facing teams and resilience of system
- What information firms may need from customers to assist them in handling financial difficulty going forward (as the FCA has indicated that the obligation on firms not to ask for evidence from customers impacted by the pandemic and seeking forbearance is under review); and
- Fairness in respect of retaining the repossession ban under existing guidance versus fairness of repossession of loan security where a customer has no realistic prospect of getting back on track.
There is a short time for firms to response to the Call for Input with the FCA requiring responses by 5pm on 7 August 2020.
If responses to the Call for Input indicate that further guidance is needed, the FCA intends to publish draft guidance for comment to the following timetable:
- Mortgages: draft guidance published in late August, with final guidance published in early September; and
- Consumer credit: draft guidance published in mid-September, with final guidance published in late September.