The FCA has published an updated version of its June payment deferral guidance for firms dealing with mortgage customers experiencing financial difficulty, proposing to extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of COVID-19.
The regime has been extended from 31 October 2020 to 31 January 2021, with customers potentially able to benefit from deferrals up to 30 April 2021.
- Customers that have not yet had a payment deferral will be eligible for 2 payment deferrals of up to 6 months in total.
- Customers currently relying on an initial payment deferral will be eligible for another payment deferral of up to 3 months.
- Customers who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to 3 months.
The FCA has also published an updated version of the September “Additional Guidance” dealing with treatment of customers continuing to experience financial difficulty after 2 payment deferrals (or who need support after the deferral regime ends).
As before, the FCA has sought to cover unregulated mortgage arrangements and unauthorised lenders, warning that:
- failure by authorised lenders to follow the guidance in relation to unregulated loans (e.g. investment property mortgages) may be a factor in considering whether such firms continue to meet their Threshold Conditions; and
- unauthorised persons to whom regulated loans have been assigned may fall foul of the Consumer Protection from Unfair Trading Regulations 2008 if they do not act according to the guidance.
The FCA has changed very little in extending the deferral scheme:
- If a customer has already ended a payment deferral, where a further deferral is now granted, the FCA expects firms to work with Credit Reference Agencies to ensure any necessary rectifications are made to ensure there is no worsening status recorded for the intervening period.
- Where customers have resumed payments after an initial deferral and subsequently require further support, firms should offer a further 3 month deferral unless:
- the firm agrees an alternative option with the customer that the firm reasonably considers is in the customer’s best interests;
- an alternative option has already been put in place following the original deferral period; or
- the customer has failed to maintain contractual payments since the deferral period ended.
The Additional Guidance has been updated to reflect the extension of the payment deferral scheme, but largely remains the same in terms of how firms should approach customers who continue to experience payment difficulties once they are no longer eligible for a deferral.
Repossessions
This is now covered in the “Additional Guidance”.
Outside of exceptional circumstances (e.g. the customer actually requesting such action) firms are now banned from repossessing mortgaged properties until 31 January 2021. The FCA has reminded firms that this applies to all mortgage customers, not just those that have received a deferral.
Firms are still required to comply with the Additional Guidance when considering repossession in the case of a payment deferral customer that has continued to experience difficulties, although there are a couple of changes to note.
Despite the ban, firms may commence or re-commence and continue possession proceedings as long as they follow the guidance, MCOB 13 and pre-action protocols.
Previously the Additional Guidance stated that where firms did seek or enforce a warrant for repossession or of restitution, they could not do so where there were reasonable grounds to believe that the borrower or their household was required to self-isolate, or were subject to a lockdown and the borrower/household could not access alternative suitable accommodation. These specific scenarios have been removed; however:
- firms are reminded of the need for fair and appropriate treatment for particularly vulnerable customers, including where vulnerability results from coronavirus; and
- the updated guidance also requires firms to consider carefully the potential impacts on customers of ongoing possession proceedings when considering whether it is appropriate to commence or pursue repossession proceedings in a particular case at a time when a warrant for possession will not be sought.
It is not clear if the FCA has sought to make repossession harder for lenders; however, arguably this now requires firms to pay due regard to a wider set of circumstances when deciding whether to actually take possession or not (or even start the process in the first place).
Debt help and money guidance
The FCA has reflected the fuller guidance on customer referrals to debt help and guidance resources set out in its Additional Guidance in the updated Payment Deferral Guidance.
Next steps
The FCA has asked for comments by 10am on Thursday, 5 November 2020. Given the short time frame and the fact that this largely extends the existing regime, it looks like the regulator expects there to be little change to the draft guidance.
If you would like to discuss any of the above, please contact us.
Authored by Charles Elliott
