The Financial Conduct Authority (FCA) has announced a set of new draft proposals in response to the Government’s latest announcement to place England into a second lockdown between 5 November 2020 and 2 December 2020. The developments are split into draft guidance for mortgage lenders and an announcement that a similar set of guidance is to published those for unsecured consumer credit, including motor finance and credit cards.
As to mortgages, the FCA foreshadowed its full details on 31 October, and published the draft guidance proposals on 2 November 2020. The key headline is the availability of payment deferrals (‘mortgage holidays’) beyond the original deadline of 31 October. Borrowers are to be able to request a deferral at any point up until 31 January 2021, for a period of up to 6 months in total. No customer may receive more than 2 deferrals, up to total of 6 months. Borrowers who previously had a deferral of fewer than 6 months may request a deferral of months which subsequently adds-up to this 6 month total. Whilst the deferrals will not be counted as missed payments on a credit file, they may still affect an individual’s credit rating, or their ability to borrow in the future.
The FCA continues to promote ‘tailored support’ (as set out in its September guidance) as the optimal approach for lenders to take with customers who have already benefited from a 6-month deferral but continue to require additional support.
In the draft guidance at section 7, the FCA sets out its position on repossessions. Lenders may commence, re-commence or continue possession proceedings, provided they adhere to the guidance, MCOB 13, and applicable Pre-Action Protocols. However, lenders should not seek or enforce a warrant for possession before 31 January 2021, save for in exceptional circumstances such as a customer requesting that the enforcement proceedings continue.
The FCA has reiterated that any borrower who can afford to continue making repayments should do so.
Comments on the proposals are invited by email up until the deadline of 10:00am on 5 November 2020. The final guidance will be published shortly thereafter.
The FCA has further announced that it will propose updates to the temporary guidance on other forms of borrowing, namely personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawnbroking and high-cost short-term credit. The intention is for high-cost short-term credit (such as payday loans) customers to be able to apply for a 1-month payment deferral if they have not yet done so, and for other borrowers (for longer-term debts) to request a deferral for up to 6 months. Again, tailored support is encouraged for those who have already benefited from such deferrals. Further details are still to be announced, along with the expected publication of draft guidance.