The Financial Conduct Authority (FCA) has proposed the next stage of support for finance customers who continue to face payment difficulties due to Covid-19.
During the initial phase of the pandemic, payment deferrals provided motor finance customers with temporary support. However many customers remain in financial difficulty are expected to resume full repayment following the payment deferral.
The draft guidance published today applies both to consumers who have benefitted from payment deferrals and support under the current guidance who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends.
If these measures are confirmed, the FCA would expect that firms:
- 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 will monitor firms to ensure borrowers are treated fairly having regard to their individual circumstances. Customers should be given time to consider their options and to seek debt advice (if necessary) before deciding on the support they take.
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 said it expects firms to be clear about the credit file implications of any forms of support offered to consumers.
Christopher Woolard, interim chief executive at the FCA, said: “Our proposals are designed to help people who have been facing payment difficulties because of the pandemic get back on track with tailored support from firms. For those who can restart payments, it is in their best interests to do so.”