In April 2020 the FCA published temporary guidance setting out how it expects firms to support consumer credit and overdraft customers who were facing temporary payment difficulties because of the exceptional circumstances arising out of coronavirus. This guidance was updated in July (the July Guidance).
On 31 July 2020, the FCA published a Call for Input seeking views on what support would be needed by consumers who had already had a second payment deferral under the July Guidance or who were experiencing payment difficulties as a result of circumstances relating to coronavirus once the July Guidance was no longer in effect.
On 16 September 2020, the FCA published additional draft guidance for consumer credit firms setting out, among other things, that firms should provide tailored support to customers facing payment difficulty as a result of coronavirus. The FCA also published draft guidance setting out that firms should provide tailored support to customers with arranged overdrafts who continue to face payment difficulties due to coronavirus.
On 30 September 2020, the FCA published finalised guidance for consumer credit and overdraft customers. The guidance applies both to consumers who have benefitted from support under the July Guidance and continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus once the July Guidance ends on 31 October 2020.
In relation to consumer credit, 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.
Also the FCA confirms 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 has also published a Feedback Statement on its September consultation on the additional guidance. In the Feedback Statement the FCA explains the changes it made to the final guidance following the consultation. The changes included amendments to clarify:
- The scope and application of the guidance on preventing escalating balances.
- The treatment of deferred amounts.
- How firms may put in place sustainable arrangements, including the assessment of income and expenditure and multiple debts.
- How the guidance applies to certain consumer credit products.
- Various issues raised in response to the overdraft proposals.