FCA reminds firms of their continuing obligations as mortgage payment deferral application period ends

The March 31 deadline for applying for a payment holiday on a mortgage, loan or other arrangements under the Financial Conduct Authority’s COVID-19 special measures has now passed.

However, the FCA wishes to stress to firms that they still have an obligation to provide what it calls ‘tailored support’ to anyone who has been financially affected by coronavirus and who continues to require assistance with their mortgage payment schedule.

The five outcomes the FCA wants to see from this tailored support are:

• Customers receive appropriate forbearance that is in their interests after consideration of their individual circumstances.
• Firms support their customers through a period of payment difficulties and uncertainty, including by considering their other debts and essential living costs.
• Firms recognise the vulnerability and respond to the particular needs of vulnerable customers.
• Firms have systems, processes and adequately trained staff, with any staff incentives aligned with providing their customers with the help they need.
• Customers should receive the support they need in managing their finances, including through self-help and money guidance. Firms should signpost or refer them to debt advice if this meets their needs and circumstances.

A firm should contact a customer in good time before the end of a mortgage payment deferral period. The firm should give them information about the resumption of payments and how to get further support if needed. If the customer indicates that they are still facing payment difficulties, the firm should work with the customer to resolve these difficulties before payments are missed.

Once a forbearance strategy has been agreed, firms should not repeatedly pursue this without re-considering whether it remains appropriate. If a customer repeatedly fails to meet an arrangement to pay, then firms should consider whether it is appropriate to the customer’s individual circumstances to continue with this, or whether they should explore alternative options.

It is now possible, once again, for a mortgage lender to re-possess a property. However, the FCA stresses that this must only be done as a last resort when all other reasonable methods of resolving the matter have been attempted.

The FCA has published a report after examining the practices of 17 mortgage firms (both 1st and 2nd charge), 15 personal loan and credit card firms, 18 higher cost credit firms, nine motor finance firms, nine retail finance firms and a number of retail banks and building societies.

This report shows that consumers have generally been able to get support as their deferral periods come to an end. All of the firms in the review had vulnerable customer policies, with 94% of mortgage firms and 64% of credit firms having reviewed or expanded these procedures as a result of the pandemic.

The FCA says it has noticed that there has been an increase in the number of inexperienced staff giving assistance to borrowers in financial difficulty. This may be because of the increase in the number of customers requiring assistance and the need to recruit additional staff at short notice. The FCA reminds firms that all staff must receive sufficient training and that management are responsible for ensuring there is sufficiently robust monitoring of staff performance in place.

Credit providers should consider that the most difficult period may still lie ahead, even though the UK’s lockdown restrictions have started to ease. Unemployment might not peak until the final quarter of this year, according to some predictions, so that could be the period when customers require the most assistance.

Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said:

“As we move into the next phase of the pandemic, we want to reassure consumers that they will continue to receive fair and appropriate support. We encourage those in difficulty to contact their lender to discuss their options.

“We’ve been monitoring how firms are providing support and found they have responded well to the challenge of providing tailored support, but there is more to do. We’ve set out where firms need to improve in a report on how they are implementing tailored support.”