FCA pushes for tailored support in new consumer credit guidance

The proposals will cover users of credit cards, personal loans, overdrafts, motor finance, buy-now pay-later, rent-to-own and high-cost short-term credit products. This new guidance will become important for customers still struggling financially as their payment deferrals expire.

As detailed in the new proposals, the FCA expects firms to be flexible and employ a range of short term and long term options to support customers and put in place sustainable repayment arrangements.

The sustainable repayment arrangements, the FCA said, should be affordable and take account of customers’ wider financial situation, including other debts and essential living expenses.

The FCA have also proposed that firms should prevent customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges necessary. The watchdog has also suggested that firms should give customers time to repay, without pressurising them into repaying any debts within an “unreasonably short period of time”.

Jane Tully, director of external affairs at the Money Advice Trust, said: “We are pleased to see that firms will be expected to offer targeted payment reductions and deferrals for customers facing short-term uncertainty beyond October. We also welcome the FCA’s specific guidance for firms on refinancing existing credit agreements where lower payments can be made over a longer term – this is an important post-Covid forbearance option that should be made more accessible to customers.

“The regulator’s plans could go further, however – in particular, we need to see continued credit rating protections where the outbreak has caused only temporary financial difficulty.”

Richard Lane, director of external affairs at StepChange, said: “While we welcome the broad thrust of this new guidance, we have concerns that it leaves open the risk of different lenders adopting very different approaches, leaving customers caught in something of a lender lottery in terms of how their ongoing problems may be managed.

“We need to understand how lenders will implement the guidance in practice, but we welcome the strong signposting to debt advice that the FCA flags as an appropriate measure that lenders should put in place.”