United Kingdom (and EU regulation)

FCA confirms support for consumer credit customers impacted by COVID-19

By Matthew Gregory (UK) on November 20, 2020 Posted in Consumer credit, United Kingdom

On 19 November 2020, the FCA confirmed updated guidance to firms setting out enhanced support that should be available to consumer credit customers experiencing payment difficulties as a result of the COVID-19 pandemic. The guidance covers users of personal loans, credit cards, store cards, catalogue credit, rent to own, buy now pay later, pawn broking, motor finance and high-cost short-term credit.

In summary, the updated guidance provides that:

Those who have not yet had a payment deferral will be eligible to apply for payment deferrals of up to 6 months in total.
Those who currently have a payment deferral will be eligible to apply for a further deferral, as long as the total length of deferrals doesn’t exceed a maximum of 6 months in total.
Those who have previously had a payment deferral of less than 6 months will also be eligible to apply for a further payment deferral, as long as the deferrals don’t exceed 6 months in total.
A firm may assess that a payment deferral is obviously not in a customer’s interest. In such cases, the firm should instead provide tailored support appropriate to the customer’s circumstances.
Consumers who have already had 6 months of payment deferrals or who are in arrears or receiving tailored support, will not be eligible for a further payment deferral. Instead, firms will provide tailored support appropriate to their circumstances. This 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 1 month.

Consumers will have until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and subject to the maximum 6 months allowed. If borrowers who have not yet taken a deferral think they need the full 6 months, they should apply in good time before their February 2021 payment (to cover a full six months of payments, from February to July inclusive).