On 25 November 2020, new guidance for lenders from the Financial Conduct Authority (FCA) regarding consumer credit customers comes into force.

The guidance was published on 19 November, at which point the FCA encouraged firms to act in line with the principles prior to their coming into force on 25 November.

Following a brief consultation period which closed on 5 November, the Finalised Guidance is in line with the Draft Guidance which had previously been published on 2 November. Firms are expected to provide payment deferrals for up to a total of 6 months to customers. Those who have either not yet requested a payment deferral from their lender, or those who have previously been granted a deferral of fewer than 6 months’ duration, may request a deferral up to the maximum period of 6 months. The exception to this is high-cost short-term credit, for which a shorter deferral of up to 1 month is permitted.

Borrowers who have already had 6 months of payment deferrals are not eligible for any further payment deferrals. Instead, tailored support must be given to them by lenders, which are bespoke arrangements appropriate to the borrower’s individual circumstances. This may include refinancing, forbearance, a bespoke repayment plan and the option to defer further payments.

There are individual Guidance documents for various aspects of consumer lending:

• Personal loans;
• Credit cards (including retail revolving credit);
• Motor finance;
• High-cost short-term lending, such as pay-day loans; and
• Rent-to-own, buy-now pay-later and pawnbroking.

There is also a Tailored Support Guidance document. Within Section 6 of said Guidance is the guidance that a firm should not, absent exceptional circumstances, terminate a regulated agreement or repossesses vehicles or goods ‘that the customer needs’ before 31 January 2021. Exceptional circumstances include where a customer wishes to continue with the repossession, where they voluntarily surrender the vehicle, or where they have already abandoned the vehicle.

These documents follow the previously-published guidance from April 2020, which was updated in July 2020 and supplemented by additional guidance for firms on 30 September 2020.

Whilst deferrals will not be reported as missed payments on a customer’s credit file, they may still adversely affect their ability to obtain credit in the future. Customers may apply for an initial (or further) payment deferral at any point up until 31 March 2021. Extensions may be operative up until 31 July 2021, provided that consecutive payments (of up to 6 months) are being deferred.

The FCA will continue to monitor the ongoing developments due to the COVID-19 pandemic and will keep its guidance under review.