Recent regulatory developments of interest to financial institutions with focus on consumer finance. Includes updates on the latest FCA COVID-19 relief. See also our Related Materials links.
- Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020
- COVID-19: FCA confirms support for mortgage borrowers
- COVID-19: FCA updates guidance on delaying mortgage capital repayments
- COVID-19: FCA confirms support for consumer credit customers
Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (SI 2020/1311) have been published, together with an explanatory memorandum and a final impact assessment. The Regulations:
- establish the first part of a debt respite scheme for individuals in problem debt. This gives eligible people, who receive professional debt advice, access to a 60-day period in which interest, fees and charges are frozen and enforcement action is paused. This moratorium period is commonly known as "breathing space";
- establish an alternate route by which the protections of a moratorium may be accessed by individuals receiving mental health crisis treatment, and ensure that the protections are in place for the duration of their crisis treatment;
- provides for the Statutory Debt Repayment Plan (SDRP), a statutory agreement that will enable a person in problem debt to repay their debts to a manageable timetable, with legal protections from creditor action for the duration of their plan. However, the Government intends to implement the SDRP over a longer timeframe and has not yet set a specific implementation date for this part of the scheme.
The Regulations come into force on 4 May 2021, with the exception of certain specified provisions (referred to in regulations 1(3) to (7)).
COVID-19: FCA confirms support for mortgage borrowers
Following its consultation on draft guidance, the UK Financial Conduct Authority (FCA) has confirmed updated guidance to firms setting out the enhanced support that should be available to mortgage borrowers experiencing payment difficulties as a result of the coronavirus. We reported on the FCA's consultation proposals in our separate briefing: FCA extends the COVID-19 payment deferral scheme for mortgages and updates its additional guidance.
The FCA has also published feedback to the draft guidance, and its response, in a feedback statement, FS20/17. The FCA explains that its final guidance is published subject to several changes. These include amendments to clarify:
- the relationship between the "Payment Deferral Guidance" (Mortgages and Coronavirus: Payment Deferral Guidance) and the "Tailored Support Guidance" (Mortgages and Coronavirus: Tailored Support Guidance) and when firms should follow each;
- when firms should offer payment deferrals, including for customers who have already taken a payment deferral under the guidance (including its previous versions) and those who are experiencing payment difficulties and need support for the first time as a result of coronavirus; and
- how payment deferrals taken under the Payment Deferral Guidance interact with the FCA's guidance published in PS 20/11 (Removing barriers to intra-group switching and helping borrowers with maturing interest-only and part-and-part mortgages).
The newly published finalised guidance, which update the FCA's guidance that was published in September 2020, comprise:
The FCA has also confirmed that no one should have their home repossessed, without their agreement, until after 31 January 2021.
The FCA will continue to keep the support available to consumers under review. It reiterates that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary.
COVID-19: FCA updates guidance on delaying mortgage capital repayments
The FCA has updated its webpage on PS20/11: Removing barriers to intra-group switching and helping borrowers with maturing interest-only and part-and-part mortgages. PS20/11 included temporary guidance, published on 23 October 2020, to help some borrowers with maturing interest-only and part-and-part mortgages who are affected by the conditions created by the COVID-19 pandemic.
The FCA has issued an updated version of the guidance in relation to delaying the capital repayment until 31 October 2021 on interest-only and part-and-part mortgages that mature between 20 March 2020 and 31 October 2021. The updated guidance states that a customer can take advantage of a mortgage payment deferral after their mortgage has matured and will still be able to delay repaying their capital until 31 October 2021. The FCA previously stated that if a customer fails to make interest payments after maturity then the guidance would no longer apply. However, in light of the FCA's updated guidance on mortgage payment deferrals (see above), it has clarified this.
COVID-19: FCA confirms support for consumer credit customers
On 19 November 2020, the FCA confirmed its updated guidance to firms setting out the enhanced support that should be available to consumer credit customers experiencing payment difficulties as a result of the coronavirus. The guidance covers users of personal loans, credit cards, store cards, catalogue credit, rent to own, buy now pay later, pawnbroking, motor finance and high-cost short-term credit. We reported on the FCA's preceding consultation in: COVID-19: FCA consults on extended support for consumer credit customers.
The FCA has also published feedback to the draft guidance, and its response, in a feedback statement, FS20/18. Most respondents supported the FCA's proposals.
The FCA has published the following final guidance on its webpage, updating its previous September guidance:
The guidance will come into effect on 25 November 2020, although the FCA encourages firms to provide the enhanced support sooner if they are able to.
The FCA reiterates that consumers should keep up with payments on their loans or credit products if they can afford to do so, and should only request payment deferrals where absolutely necessary.