On 16 September 2020, the FCA published Draft guidance: consumer credit and coronavirus – additional guidance for firms.
The FCA originally published guidance on credit cards (including retail revolving credit) and personal loans on 9 April 2020 and later updated it on 1 July 2020. Publication of guidance covering motor finance and other high-cost credit products took place on 24 April 2020 and was updated on 15 July 2020. The current guidance will continue to provide support for those impacted by coronavirus until at least 31 October 2020 – with consumers able to take a first or second payment deferral. The FCA expects both pieces of updated guidance (the July guidance) to expire on 31 October 2020, but will keep this under review depending on how the wider situation develops.
The draft guidance supplements the July guidance and sets out the FCA’s expectations of firms when dealing with customers who: (i) have benefitted from 2 payment deferrals granted under the July guidance and remain in payment difficulties; (ii) have benefitted from an initial payment deferral when the July guidance is no longer generally in effect and remain in payment difficulties; or (iii) experience payment difficulties as a result of circumstances relating to coronavirus when the July guidance is no longer generally in effect.
If these measures are confirmed, the FCA would expect that firms to:
- Recognise the uncertainties and challenges that many customers will face in the coming months, 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 to minimise stress and anxiety experienced by customers in financial difficulty.
- 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.
- Give customers time and opportunity to repay and do not pressurise them into repaying their debt within an unreasonably short period of time.
- Prevent customers’ balances from escalating 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.
The FCA has also published Draft guidance: overdrafts and coronavirus – additional guidance for firms. When finalised the draft guidance will supplement previous FCA guidance published in July 2020, ‘Overdrafts and coronavirus: updated temporary guidance for firms’ (the overdraft guidance). The overdraft guidance will continue to provide support for those impacted by coronavirus until at least 31 October 2020 – with customers able to seek an interest free overdraft buffer that could last until 31 January 2021. The FCA considers that firms need to be preparing to move back to providing their customers, including those newly affected by coronavirus, with the tailored support that it would normally expect once the overdraft guidance is no longer in effect. Therefore the draft guidance sets out the FCA’s expectations of how firms should support those customers who are affected by coronavirus once the overdraft guidance is no longer in effect.
The FCA is proposing that firms contact overdraft customers who have received temporary support to determine if they still require assistance. Where a customer needs further support, firms should use measures 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. 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 lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. The FCA expects firms should be clear about the credit file implications of any forms of support offered to consumers.
The deadline for comments on both sets of draft guidance is 21 September 2020.