The Financial Conduct Authority (FCA) has confirmed updated guidance to firms setting out enhanced support that should be available to consumer credit customers experiencing payment difficulties as a result of 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.

The guidance will come into force on 25 November but the FCA encourages firms that are able to start providing this enhanced support sooner to do so.

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 (also known as freezes or holidays) where absolutely necessary. The FCA has also provided more detail about who is able to apply for payment deferrals under today’s finalised guidance.

The guidance sets out that:

  • Those who have not yet had a payment deferral will be eligible to apply for payment deferrals of up to 6 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 doesn’t exceed a maximum of 6 months in total.
  • Those who have previously had a payment deferral of less than 6 months will also be eligible to apply for a further payment deferral, as long as the deferrals don’t exceed 6 months in total.
  • A firm may assess that a payment deferral is obviously not in a customer’s interest. In such cases, the firm should instead provide tailored support appropriate to the customer’s circumstances.
  • Consumers who have already had 6 months of payment deferrals or who are in arrears or receiving tailored support, will not be eligible for a further payment deferral. Instead, firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.
  • High-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of 1 month.

Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA, sai “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.”

Consumers who are struggling with the cost of their overdrafts as a result of coronavirus will be able to request support which reflects their individual circumstances, as set out in our tailored support guidance, published in September. This could include reducing or waiving interest.

Consumers will have until 31st March 2021 to apply for an initial or a 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 6 months allowed. If borrowers who have not yet taken a deferral think they need the full 6 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).

A payment deferral under today’s finalised guidance would not be reported as missed payments on a consumer’s credit file. This does not mean that consumers’ ability to access credit will be unaffected, as lenders may take into account a range of information when making lending decisions.

Tailored support may be reported on a consumer’s credit file, and lenders should inform consumers where this will be the case. This would include any further payment deferrals offered. Eric Leenders, Managing Director of Personal Finance at UK Finance, said “Lenders continue to provide unprecedented support to borrowers impacted by the Covid-19 crisis. We are supportive of the FCA’s guidance and continue to work through the detail to ensure customers continue to receive the help they need.”

“It will always be in the long-term interest of customers who are able to do so to resume making payments, but for anyone who is still struggling ongoing support will be available. This could include the option of further payment deferrals on credit cards and personal loans in some circumstances or providing more tailored support where appropriate.”

Responding to the FCA announcement the banking and finance industry has committed to renewed support for consumer credit customers facing financial difficulty

A total of 1.16 million payment deferrals on credit cards have been granted to customers with over 64,000 still in place, and over 814,000 payment deferrals on personal loans have so far been granted with over 31,000 still in place. Of those credit card and personal loan customers whose payment deferral has come to an end, evolving industry analysis suggests that three-quarters have now returned to making repayments.