If a customer has failed to engage with a business that has made reasonable attempts to contact them, the business is permitted to take repossession action, regardless of whether a customer would have been eligible for a payment deferral.
Businesses must consider how repossession would impact vulnerable customers, taking both the wider and financial implications into account when deciding whether such repossession is appropriate.
These obligations would include considering whether the customer is at greater risk of harm due to coronavirus. The FCA intends to support companies to treat consumers fairly, and in enabling them to get back to a more stable financial position.
Support available for consumers
Customers experiencing financial difficulties because of coronavirus are still permitted to apply for a payment deferral or receive tailored support. Customers in that predicament and seeking a payment deferral have until March 31 2021 to make such an application for mortgages and certain consumer credit products.
A customer is permitted to request a payment deferral of up to six months in total, although businesses can only agree a payment deferral of up to three months at a time. This arrangement is designed to ensure that deferrals remain an appropriate solution for the customer.
Next steps
The updated mortgages guidance and consumer credit guidance came into force on January 29 2021 and will remain in force until varied or revoked. Both pieces of guidance emphasise the FCA’s expectations it places on businesses when considering repossessions. The regulator has customer-centred outcomes at the core of its guidance.
Businesses must continue to ensure that a customer’s individual circumstances are considered when forbearance measures are adopted, protecting them from escalating debt once such forbearance arrangements have been put in place.
Businesses are also required to treat their customers fairly. This would include a requirement that a company has adopted appropriate measures to ensure customers are not placed under undue pressure to repay debt within an unreasonably short period of time.
Businesses are also required to implement other systems and processes; making sure staff are fully trained, for example, and with their incentives aligned around providing customers with appropriate assistance. Businesses must pay particular attention to vulnerability of customers to ensure their needs and concerns are addressed.
The FCA has stated that due to the ongoing uncertainties arising from the impact of coronavirus, it will continue to keep both pieces of guidance under review in case it needs to be updated or amended, providing new guidance if required.
Bill McCaffrey is head of consumer credit at law firm CMS
