FCA proposes to extend payment deferrals for borrowers impacted by COVID-19
In September, the Financial Conduct Authority (FCA) revealed tailored supports for borrowers affected by COVID-19 after 31 October, which it is now proposing to enhance as a result of recently implemented restrictions, including extending payment deferrals.
The FCA is proposing to extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of coronavirus.
This will mean that: those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total; those who currently have an initial payment deferral will be eligible for another deferral of up to three months; those who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to three months.
The regulator has emphasised that it is important that borrowers who can afford to make repayments continue to do so.
The FCA is urging consumers not to contact their lender until the enhanced measures are in place; lenders will soon provide further information.
Under the FCA’s proposals, borrowers would have until 31 January 2021 to request a payment deferral.
A payment deferral under these proposals would not be reported as missed payments on a borrower’s credit file; however, this does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.
The FCA has also proposed that no one will have their home repossessed without their agreement until after 31 January 2021.
Some borrowers would not be eligible for a payment deferral: if they have already had two payment deferrals (of up to six months in total), and tailored support will be more appropriate to their circumstances; and if they have agreed alternative support with their lender.
Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case.
Sheldon Mills, interim executive director of strategy and Competition at the FCA, said: “We are working with lenders to ensure enhanced support remains available to borrowers struggling financially following changes in the coronavirus situation across the UK.
“Tailored support will still be offered and remains the most appropriate option for many borrowers, but we are proposing to extend payment deferrals for additional support.
“We also want to make sure no one has their home repossessed during this time.
“It is in borrowers’ own long-term interest only to take a payment deferral when absolutely necessary.
“Those that are able to keep paying, should do so. This allows support to be targeted to those most in need.
“We are also asking borrowers not to contact their lender yet, and instead wait for further updates, including from their lenders, soon.”
The FCA has asked for comment on the proposals to be provided by 10am on Thursday 5 November, with the final guidance to be published as soon as possible after the comment period closes.
Eric Leenders, managing director of personal finance at UK Finance, said: “Lenders are continuing to provide unprecedented levels of support to help customers through the COVID-19 crisis and have been working closely with the FCA to ensure that customers impacted by the new lockdown measures will be able to access the assistance they need, including being able to defer payments on their mortgages where this can help.
“While these arrangements are being put in place customers seeking to access this support do not need to contact their lenders yet. Lenders will provide information shortly on how to apply for this support.”
“The sector is working closely with the Financial Conduct Authority to ensure customers impacted by the new lockdown measures will be able to access the most appropriate support.”
Robin Fieth, chief executive of the Building Societies Association (BSA), said: “We recognise that the ongoing economic issues being caused by the pandemic are generating significant issues for some households. Hence the extension of this payment deferral scheme.
“For those with a mortgage the best advice will always be to continue to pay if you can, and to discuss any concerns early with your lender.
“For those who are having difficulties, a payment deferral for a total of six months followed by ongoing tailored support are available. Lenders are working hard to support their customers through this time.”