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27 August, 2020 Open access

Financial Conduct Authority outlines proposals to ensure that tailored support is provided to mortgage borrowers who continue to face payment difficulties due to coronavirus

New draft guidance seeks to ensure that financial services firms don't take a 'one size fits all’ approach after 31 October 2020 when the current guidance is due to expire

The Financial Conduct Authority (FCA) has outlined new proposals to ensure that tailored support is provided to mortgage borrowers who continue to face payment difficulties due to coronavirus (COVID-19).

Highlighting that, during the initial phase of the pandemic, payment holidays have provided mortgage borrowers with immediate and temporary support and have helped millions of consumers through the immediate impacts of the emergency, the FCA notes that the majority of customers who have had a payment holiday will soon be expected to resume full repayment, despite the fact that many will remain in financial difficulty.

As a result, the FCA has published new draft guidance for firms -

'... to ensure that consumers - both those who have benefitted from payment deferrals under the current guidance who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends - get the support they need in these extraordinary times.'

While the current guidance will continue to provide support for those impacted by coronavirus until 31 October 2020 - with consumers able to take a first or second three-month payment deferral - the FCA says that it expects it to expire on 31 October, and that its proposed new guidance will ensure that financial services firms should not then take a 'one size fits all’ approach -

'Under the proposed guidance, firms should prioritise giving tailored support to borrowers who are at most risk of harm, or who face the greatest financial difficulties. 

Firms should also provide borrowers with the support they need in managing their finances, including through self-help and money guidance, and refer borrowers to debt advice if this meets their needs and circumstances.

Where borrowers require further support from lenders, either at the end of payment holidays under our guidance, or where they are in need of support for the first time, this would be reflected on credit files in accordance with normal reporting processes. This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms should be clear about the credit file implications of any forms of support offered to borrowers.'

Stakeholders are invited to make comments on the draft guidance by 5pm on Tuesday 1 September 2020.

For more information see FCA proposes the next stage of support for mortgage borrowers.