On 2 November 2020, the FCA announced that it would be updating its temporary guidance on personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawn broking and high-cost short-term credit to support consumer credit customers financially affected by the COVID-19 pandemic.
On 4 November 2020, the FCA issued a consultation on updating the temporary guidance. The deadline for responding to the consultation is 6 November 2020.
In summary, the FCA proposes to extend payment deferrals and other support to personal loans, credit cards, motor finance, rent-to-own, buy-now-pay-later and pawn broking customers who are experiencing payment difficulties because of the COVID-19 pandemic. The proposals, if implemented, would mean that:
- Those who have not yet had a payment deferral will be eligible for 2 payment deferrals of up to 6 months in total.
- Those who currently have an initial payment deferral, will be eligible for a further payment deferral of up to 3 months.
- High-cost short-term credit (HCSTC) consumers, such as those with payday loans, who have not yet had a payment deferral would be eligible for a payment deferral of 1 month.
The FCA states that it is important that borrowers who can afford to make repayments continue to do so.
Under the FCA’s proposals, borrowers would have until 31 January 2021 to request an initial payment deferral. A payment deferral under the FCA’s proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in the future, as lenders may take into account a range of information when making lending decisions.
The FCA states that consumer credit customers who have already benefitted from 2 payment deferrals (or 1 for HCSTC), and are still experiencing payment difficulties should speak to their lender who will be able to provide tailored support. This also applies to those who have resumed repayments after an initial payment deferral, as they would not be entitled to a further deferral, but should receive tailored support if they are experiencing payment difficulties. Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case.
The FCA is asking borrowers not to contact their lender yet, and instead wait for further updates, including from their lenders.