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The FCA has published further draft iterations of its COVID-19 guidance for firms dealing with mortgage customers experiencing financial difficulty. The June 2020 guidance on payment deferrals (the Payment Deferral Guidance) has been extended until 31 January 2021, with very little change to the existing scheme. This means that customers may be able to benefit from payment deferrals up to the end of April 2021, although customers are still limited to two three month deferrals. Customers who have already had two deferrals will continue to fall under the “Additional Guidance” (first published in September 2020 and updated to reflect the extension of the original payment deferral regime).
The FCA has published an updated version of its June payment deferral guidance for firms dealing with mortgage customers experiencing financial difficulty, proposing to extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of COVID-19.
The regime has been extended from 31 October 2020 to 31 January 2021, with customers potentially able to benefit from deferrals up to 30 April 2021.
The FCA has also published an updated version of the September “Additional Guidance” dealing with treatment of customers continuing to experience financial difficulty after 2 payment deferrals (or who need support after the deferral regime ends).
As before, the FCA has sought to cover unregulated mortgage arrangements and unauthorised lenders, warning that:
The FCA has changed very little in extending the deferral scheme:
The Additional Guidance has been updated to reflect the extension of the payment deferral scheme, but largely remains the same in terms of how firms should approach customers who continue to experience payment difficulties once they are no longer eligible for a deferral.
This is now covered in the “Additional Guidance”.
Outside of exceptional circumstances (e.g. the customer actually requesting such action) firms are now banned from repossessing mortgaged properties until 31 January 2021. The FCA has reminded firms that this applies to all mortgage customers, not just those that have received a deferral.
Firms are still required to comply with the Additional Guidance when considering repossession in the case of a payment deferral customer that has continued to experience difficulties, although there are a couple of changes to note.
Despite the ban, firms may commence or re-commence and continue possession proceedings as long as they follow the guidance, MCOB 13 and pre-action protocols.
Previously the Additional Guidance stated that where firms did seek or enforce a warrant for repossession or of restitution, they could not do so where there were reasonable grounds to believe that the borrower or their household was required to self-isolate, or were subject to a lockdown and the borrower/household could not access alternative suitable accommodation. These specific scenarios have been removed; however:
It is not clear if the FCA has sought to make repossession harder for lenders; however, arguably this now requires firms to pay due regard to a wider set of circumstances when deciding whether to actually take possession or not (or even start the process in the first place).
The FCA has reflected the fuller guidance on customer referrals to debt help and guidance resources set out in its Additional Guidance in the updated Payment Deferral Guidance.
The FCA has asked for comments by 10am on Thursday, 5 November 2020. Given the short time frame and the fact that this largely extends the existing regime, it looks like the regulator expects there to be little change to the draft guidance.
If you would like to discuss any of the above, please contact us.
Authored by Charles Elliott