FCA finalises guidance to help firms support mortgage borrowers in difficulty

The finalised payment deferral and tailored support guidance follows previous documents published at intervals since March 2020.

Financial services expert Andrew Barber of Pinsent Masons, the law firm behind Out-Law, said: “Given the increase in government restrictions in November it is not surprising that the FCA has revisited its payment deferral guidance and tailored support guidance.

“This guidance will help those firms that have had recent contact from customers facing payment difficulties continue to provide the support that they need. With a short period of time between publication and implementation firms need to quickly read and assimilate the guidance and ensure that they are able to start applying it,” Barber said.

“Importantly firms need to also engage with customers to ensure that customers are getting the support required and not deferring payments other than where absolutely necessary. While payment deferrals will not be reported as missed payments there will still be lasting impacts for customers and firms need to do everything they can to help customers understand and minimise these,” Barber said.

The payment deferral guidance (14 page / 218KB PDF) updates the FCA’s expectations of firms to extend the availability of payment deferrals until 31 July 2021. Firms are expected to allow customers impacted by coronavirus to defer up to six monthly payments in total, but should not provide deferrals beyond 31 July 2021.

The FCA said firms should not give payment deferrals to customers after 31 March 2021 unless they are already benefitting from a deferral. This means both those customers seeking a first payment deferral, and those who have previously accessed payment deferrals that totalled less than six months, can seek a new payment deferral up to 31 March 2021.

Any deferral extensions after 31 March should be for payments consecutive with deferred payments granted previously under the guidance, meaning that customers applying for a first payment deferral need to apply before their February 2021 mortgage payment to benefit from the full six months’ allowance.

Firms should offer support under the payment deferral guidance before offering support under the tailored support guidance, with the second document aimed at helping customers who are not receiving payment deferrals or who are not or are no longer eligible for payment deferrals.

The payment deferral guidance sets out eligibility requirements, and the process under which firms should give deferrals. The FCA said firms can offer different options to a full or partial payment deferral if they believe these are in the best interests of the customer, such as a sustainable longer term solution such as an alternative product, or another form of assistance such as a reduction in interest paid.

The FCA said firms should contact customers in good time before the end of the deferral period with information about the resumption of payments and access to further support. If customers miss the first payment after a deferral period and fails to respond to communications, the FCA said the firm should act in accordance with the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB) in the FCA handbook.

Meanwhile the tailored support guidance (22 page / 303KB PDF) is designed to help firms deliver long and short-term support to customers, including the provision of further payment deferrals where appropriate that would not be subject to the payment deferral guidance.

It covers areas including the approach to repossessions and how to help customers access sources of debt help and money guidance, and how certain MCOB provisions apply within the scope of the guidance.

The FCA also said the guidance was of potential relevance in enforcement cases when considering firms’ conduct, and firms were likely to contravene FCA principles and MCOB rules if they acted in a manner that was inconsistent with the guidance.

The regulator said it was not imposing prescriptive rules on how firms should collect information about a customer’s individual financial circumstances, or how a firm ensured any forbearance option proposed was appropriate.

As with the payment deferrals guidance, firms are warned they need to communicate on a timely basis with customers and help them understand their options, and take particular care with their approach to engaging with vulnerable customers.

The guidance came into force on 20 November 2020, three days after its publication.