Consumer finance regulatory news, 9 November 2020

Contents

• Download the full regulatory news bulletin
• COVID-19: FCA draft further guidance to support mortgage borrowers
• COVID-19 and mortgages: FCA PS20/11 to support closed book and interest – only / part-and-part borrowers
• COVID-19: FCA further proposals to support consumer credit borrowers
• COVID-19: FCA speech on TCF in credit markets
• Mortgage intermediaries: FCA Dear CEO letter
• Unsecured credit market regulation review into change and innovation: FCA call for input
• CCD: European Commission report on implementation

COVID-19: FCA draft further guidance to support mortgage borrowers

On 2 November 2020, the UK Financial Conduct Authority (FCA) published draft further updated guidance and draft updated additional guidance for mortgage firms to support mortgage borrowers financially affected by COVID-19. This is in the light of the latest government restrictions in response to COVID-19. The draft was open for comments until 5 November 2020.

Under the proposals, the June 2020 guidance on payment deferrals (the Payment Deferral Guidance) will be 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).

Following its consultation in CP20/13, the FCA has published a policy statement, PS20/11, on mortgages and removing barriers to intra-group switching, and helping borrowers with maturing interest-only and part-and-part mortgages.

The FCA has published final changes to extend the scope of its rules on internal switching to include mortgage borrowers from closed books (that is, books which are closed to new customers) sitting within the same financial group as an active lender. The FCA accepts that use of the extended regime will remain at the lender's commercial discretion, so will be "limited by factors such as eligible borrowers' risk profiles, lenders' risk appetites and wider market conditions".

The FCA has also finalised its temporary guidance that provides that customers with maturing interest-only or part-and-part mortgages should be able to defer their capital repayment until 31 October 2021. They will be required to make interest payments during that time, but lenders will be unable to repossess if they do. There is also a reminder that the FCA's temporary additional guidance on mortgages and coronavirus issued in September 2020 reconfirms that a firm should not try to repossess a borrower's property when they are needing to self‑isolate.

We consider these issues more in our briefing: Mortgage prisoners: FCA finalises further support in light of COVID-19.

COVID-19: FCA further proposals to support consumer credit borrowers

On 2 November 2020, the FCA announced that it proposes to update guidance on personal loans, credit cards, motor finance, rent to own (RTO), buy-now pay-later (BNPL), pawnbroking and high-cost short-term credit (HCSTC) to support consumer credit customers financially affected by COVID-19. This is in the light of the latest government restrictions in response to COVID-19.

Support under the guidance for credit cards, personal loans, RTO, BNPL, pawnbroking, motor finance and HCSTC products is being extended to 31 January 2021, although some provisions will remain in force beyond 31 January 2021 for customers granted payment deferrals which come to an end after that time. The September 2020 additional guidance on overdrafts is not included in this latest update as the FCA thinks the current version provides the necessary support to help consumers (for now at least).

We consider this development in greater detail in our separate article: COVID-19: FCA consults on extended support for consumer credit customers.

COVID-19: FCA speech on TCF in credit markets

The FCA has published a speech given by Jonathan Davidson, FCA Executive Director of Supervision: Retail and Authorisations, on the FCA's expectations around forbearance, operational challenges and the importance of firms recognising and responding to the needs of vulnerable customers in the credit market in light of the COVID-19 pandemic.

Mortgage intermediaries: FCA Dear CEO letter

The FCA has published a Dear CEO letter it has sent to mortgage intermediaries in which the FCA sets out its view of the key risks mortgage intermediaries pose to their consumers, or the markets in which they operate. The FCA also outlines its expectations, including how firms should mitigate those key risks, and explains the FCA's supervisory strategy and programme of work to ensure that firms are meeting its expectations.

Unsecured credit market regulation review into change and innovation: FCA call for input

The FCA has published a call for input on its review into change and innovation in the unsecured credit market ("the Woolard Review"). The market includes credit cards, overdrafts and, increasingly, unregulated products such as some "buy-now-pay-later" (BNPL) arrangements or lending through payroll. The FCA wants to know how the market is changing, particularly considering COVID-19, and how regulation can support a healthy unsecured lending market. The call for input asks questions under four themes:

• drivers and use of credit;
• change and innovation in the supply of credit;
• the role of regulation in unsecured credit markets; and
• the impact of COVID-19 and the FCA's response.

The deadline for comments is 1 December 2020. In addition to the call for input, the review team will seek evidence through a series of roundtables in November, individual interviews and research. The work will be supported by an advisory panel, which will bring a range of perspectives from firms and consumer groups to shape the review. Further details appear on the FCA's webpage on the review.

CCD: European Commission report on implementation

The European Commission has published a report to the European Parliament and Council of the EU on implementation of the Consumer Credit Directive (CCD). The Commission launched a consultation to evaluate the CCD in January 2019 and this report presents the key results of its evaluation and the lessons learnt from the application of the CCD over the past ten years, including the considerations required under Article 27(2) of the Directive.

The Commission will consider its evaluation findings in its revision of the CCD which it has already announced for the second quarter of 2021.

Download the full regulatory news bulletin 

Authored by Yvonne Clapham