Recent regulatory developments of interest to financial institutions with focus on consumer finance.
Contents
- Debt Respite Scheme (Breathing Space): Insolvency Service guidance
- COVID-19: FCA proposes update to mortgage and consumer credit repossessions guidance
Debt Respite Scheme (Breathing Space): Insolvency Service guidance
The Insolvency Service (IS) has published guidance for creditors and money advisors about the debt respite scheme (Breathing Space), which comes into effect on 4 May 2021. This follows the publication of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (SI 2020/1311).
The IS guidance comprises two documents to help navigate the regulations:
The IS guidance is also designed for debtors who may be considering entering a Breathing Space with their debt adviser.
The IS will provide and maintain the electronic service used by debt advisers.
COVID-19: FCA proposes update to mortgage and consumer credit repossessions guidance
On 13 January 2021, the FCA published draft guidance for mortgage firms and consumer credit firms setting out the FCA's proposed approach to repossessions from 31 January 2021 to update its coronavirus tailored support guidance.
The FCA's current guidance on mortgage repossessions means firms should not enforce repossessions before 31 January 2021 except in exceptional circumstances, such as a customer requesting that proceedings continue. The FCA proposes extending this guidance so that firms should not enforce repossessions before 1 April 2021.
The FCA's approach takes account of the worsening COVID-19 situation and the government's tighter COVID-19-related restrictions, which mean that consumers could experience significant harm if forced to move home at this time due to repossession proceedings. The FCA recognises that there are also government bans on evictions in some nations, which could prevent firms from enforcing home repossessions.
The FCA's current consumer credit guidance means that firms should not terminate a regulated agreement or repossess goods or vehicles under the agreement that the customer needs, before 31 January 2021, except in exceptional circumstances. The FCA proposes changing this so that consumer credit firms can repossess goods and vehicles from 31 January 2021. However, this should only be as a last resort, and is subject to complying with relevant government public health guidelines and regulations (for example on social distancing and shielding).
The FCA's proposed approach reflects the different risks and harms that customers with goods or vehicles on credit are likely to face compared to those who are at risk of losing their home. The FCA reiterates that it expects firms to exercise particular care when dealing with vulnerable customers and when deciding whether repossession of goods or vehicles is appropriate.
Comments can be made on the draft guidance until 10am on 18 January 2021.
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