The Financial Conduct Authority (FCA) has proposed an update to guidance on mortgages and consumer credit repossessions.
The update sets out the approach to repossessions and mortgages that would take effect from 31 January – existing guidance says firms should not enforce repossessions before that date except in exceptional circumstances. The draft guidance proposes extending this until 1 April 2021.
How the repossessions moratorium will work:
The consumer credit guidance currently in place means that before 31 January 2021 firms should not terminate a regulated agreement or repossess goods under the agreement that the customer needs. The FCA now proposes to change this so that consumer credit firms will be able to repossess goods and vehicles from 31 January 2021, but only as a last resort.
The regulator has highlighted that it expects firms to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate.
However the FCA also stated: “For customers who remain in payment difficulties under a relevant consumer credit agreement, continuing to restrict repossessions may not be in their interests.
“The shorter terms and higher interest rates on these agreements, combined with the depreciating value of the goods or vehicles, means that they could end up owing more in the long term if repossessions are prevented. Our approach takes appropriate account of the risks to customers of further asset depreciation, whilst providing appropriate protections by ensuring that firms repossess only as a last resort.”
Last year, the FCA issued guidance on tailoring forbearance for customers still struggling to make payments after deferrals. Credit Strategy’s first broadcast of the year will be a masterclass on how creditors can personalise collection strategies.