The Financial Conduct Authority (FCA) has now confirmed proposed guidance for consumer credit firms in providing support to customers affected by coronavirus.
The guidance covers personal loans, credit cards, store cards, catalogue credit, rent to own, buy now pay later, pawnbroking, motor finance and high-cost short-term credit.
The regulator has urged all consumer credit companies within scope to have systems and controls in place to bring the guidance into effect by 25 November.
One of the key points in the new guidance is that lenders must grant borrowers, who have not yet had a payment deferral, eligibility for deferrals of up to six months in total.
Those who currently have a payment deferral will be eligible to apply for a further deferral, as long as the total length of deferrals does not exceed a maximum of six months.
Those who have previously had a payment deferral of less than six months, meanwhile, will also be eligible to apply for a further payment deferral, as long as the deferrals do not exceed the same threshold.
High-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of one month under the new rules.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “It is in a consumer’s best interest to only take a payment deferral when absolutely necessary. Those that are able to keep paying should do so.
“However, for those continuing to face payment difficulties as a result of coronavirus, these measures will ensure they continue to be able to access much needed support during this crisis. We also want to highlight that tailored support will still be offered and remains the most appropriate option for many borrowers.”
The FCA also said that if a firm decides a payment deferral is not in a customer’s interest it should instead provide tailored support. Customers who have already had six months of payment deferrals, in arrears or receiving tailored support, will not be eligible for a further payment deferral. Instead, firms should provide tailored support, such as the option to defer further payments. Consumers will have until 31 March 2021 to apply for an initial or further payment deferral.
After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and subject to the maximum six months allowed.
If borrowers who have not yet taken a deferral think they need the full six months, they should apply in good time before their February 2021 payment (to cover a full six months of payments, from February to July inclusive).
The watchdog said that consumers who are struggling with the cost of their overdrafts as a result of coronavirus will be able to request support, which could include reducing or waiving interest.
While a payment deferral would not be reported as a missed payment on a consumer’s credit file, lenders may still take this into account when making lending decisions.
Tailored support may be reported on a consumer’s credit file and lenders should inform consumers when this is the case.