On 22 May 2020, the Financial Conduct Authority (FCA) published draft updated guidance to mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators on the treatment of customers facing temporary financial difficulties arising from the Covid-19 crisis. Once published in final form, unless updated or renewed, the updated guidance will expire on 31 October 2020.
The FCA has stated that it will not be formally consulting on the draft updated guidance but welcomed any comments by 5pm today, Tuesday 26 May. It intends to publish the final updated guidance shortly thereafter.
Where firms have dealt with any customers at the end of a payment deferral period prior to the publication of the updated guidance, they should review whether the outcomes such customers have received are consistent with those they would have received under the updated guidance. Where outcomes are not consistent, firms should make reasonable efforts to contact affected customers and give them an opportunity to take up any further help they may be eligible for under the updated guidance.
The updated draft guidance in summary
The updated draft guidance serves two purposes. It extends the original guidance on mortgage forbearance to the government’s new deadline of 31 October 2020 (including the prohibition on repossessions) and it addresses certain areas omitted from the original guidance. In particular, these include:
- how customers who have not yet been granted a payment deferral and customers who had pre-existing payment shortfalls dating from before the onset of the Covid-19 crisis should generally be treated by firms;
- how firms should go about understanding customers’ needs and circumstances at the end of a payment deferral period and, therefore, how to afford them fair treatment;
- the actions firms should take once any payment deferral period agreed with a customer comes to an end, depending on whether a customer is, or is not, able to resume full payments at the end of the deferral period;
- clarification regarding the interaction of the guidance with the provisions of the FCA’s mortgage conduct of business sourcebook;
- the approach firms should take to training, monitoring, record keeping and credit reference reporting in the context of the updated guidance; and
- details of a range of different debt assistance measures available to firms’ customers.
Concurrent Prudential Regulation Authority (PRA) guidance
Also on 22 May 2020, the PRA published a statement on the application of regulatory capital and IFRS 9 requirements to payment deferral periods granted pursuant to the FCA guidance discussed above.