On 26 January 2021, the FCA published Finalised Guidance for firms that provide Pay as You Grow (PAYG) options under the Government’s Bounce Back Loan Scheme (BBLS) so that they understand the regulator’s expectations before they start collecting debts from customers.
Chapter 7 of the FCA’s Consumer Credit sourcebook (CONC 7) applies to firms when they carry out regulated debt collection under the BBLS. Collecting debts under the BBLS may be a regulated activity where the borrower is a sole trader or small partnership. This means that CONC 7 and Principle 6 can apply to these types of borrowers. The Finalised Guidance aims to explain where firms can:
- Use and offer PAYG options in a way that complies with CONC 7.
- Recognise vulnerability and respond to the needs of vulnerable customers.
- Help borrowers who need debt advice.
Where CONC 7 does not apply to debt collection under the BBLS, firms need to refer to chapter 5 of the Finalised Guidance on the Lending Standards Board’s (LSB) Standards of Lending practice for business customers.
When helping customers in default or arrears difficulties, the FCA wants firms to deliver the following outcomes which align with the CONC 7 outcomes:
- Firms have due regard to the interests of their customers and treat them fairly.
- Customers are treated with forbearance and due consideration.
- Firms have clear, effective and appropriate policies and procedures for dealing with customers in payment difficulties and for those who the firm understands or reasonably suspects to be vulnerable.
- Customers are allowed time to consider their options and, if necessary, seek debt advice before making a decision on the support they take. Firms should refer customers to debt advice if this is appropriate. Firms should not pressure customers into repaying their debt within an unreasonably short period of time.
The Finalised Guidance is set out as follows:
- Chapter 2 – the FCA sets out how firms may comply with CONC 7 when offering PAYG options to borrowers.
- Chapter 3 – guidance on how firms can recognise vulnerability and respond to the particular needs of vulnerable customers.
- Chapter 4 – steps that firms can take to help borrowers who need debt advice.
- Chapter 5 – firms are reminded that the FCA recognises the LSB’s Standards of Lending Practice for business customers.
The Finalised Guidance came into force on 27 January 2021 and remains in force unless the FCA varies or revokes it.