The proposals, which have yet to be confirmed, will mean that lenders should continue to offer support to people who are still experiencing temporary payment difficulties.
This could include extending a payment holiday, or partial payment holiday, by a further three months. Other assistance to customers should also be considered such as reducing or waiving interest.
For customers yet to request a payment holiday, the time to apply for one would be extended until 31 October 2020.
The FCA welcomes comments on these proposals until 5pm on Tuesday 26 May and expects to finalise the guidance shortly afterwards.
Christopher Woolard, interim chief executive at the FCA, said: “Our expectations are clear – anyone who continues to need help should get help from their lender.
“We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.”
“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available.”
If borrowers are coming to the end of their payment holiday, the FCA will expect lenders to engage with their customers and find out what they can re-pay and, for those who remain in temporary financial difficulty, offer further support.
The current ban on repossessions of homes will continue until 31 October 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
The FCA reminds firms that they should consider signposting customers towards sources of debt advice if they are really struggling and be particularly aware of the needs of vulnerable customers and how they engage with them.
For customers who aren’t able to use online services, firms should make it easy for customers to access alternatives.
This guidance only applies to mortgages. It does not apply to consumer credit products which are covered by separate guidance which will be updated in due course.
Industry comment
James Tucker, CEO of Twenty7Tec said: “The proposals are going to be welcomed by homeowners and landlords who now have greater certainty over coming months. Lenders are likely to raise some interesting issues during the FCA’s brief consultation but fundamentally, there appears to be a will on all sides to extend the period.”
Robin Penfold, partner at UK law firm TLT, said the FCA’s guidance consultation raises a number points that lenders will need to consider as part of their exit strategy implementation plan.
He commented: “Given the volume of payment holiday arrangements already in place, the majority of lenders will have been exploring use of digital channels to enable the majority of customers to self-serve.
“Lenders will need to consider the updated FCA guidance, how they engage with customers before the end of the deferral period and the FCA’s expectations regarding understanding customers’ needs and circumstances.
“The guidance also includes, as one of the options, extension of the payment deferral period for a further three months. Given the emphasis on the availability of this option in the announcements made today, it is likely that lenders will see a higher than expected level of requests for this.”
Richard Pike, Phoebus Software sales and marketing director, commented: “The extension will be welcomed by borrowers, but the industry will need to manage another wave of borrower communication at a time when many lenders will have been working on recalculating borrower accounts; whilst also communicating new repayments from the initial three-month holiday period.
“A reduction in receivables for any lender is always an issue, but en-mass for a sustained period, could be a challenge for some, particularly those with securitised assets.
“Whatever the Government’s intentions, it could be that lenders will take a more detailed look at some borrowers applying for this new initiative. They will need to ensure that only borrowers that genuinely require them are accepted for the scheme, or that other risks such as LTV are considered more closely.”
FCA documents
