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Regulator wants further payment holidays reported on credit files

Written by: Shekina Tuahene
The Financial Conduct Authority (FCA) is considering reporting future mortgage payment deferrals on a consumer’s credit file as normal, in a consultation about ongoing support for mortgage and credit consumers.

The regulator has launched a consultation and is seeking input on what can be done to help consumers who have already benefited from the temporary pandemic-related measures but remain in financial difficulty once these end. 

It warned the decision to not report a worsening status on credit files could not continue indefinitely as the measure was to ensure consumers who were able to get back on track at the end of a deferral did not have a long-term negative impact on their credit score. 

However, to ensure consumers are treated fairly by future lenders it has asked firms for guidance on credit reporting and what can be done to help those affected by these “exceptional circumstances”. 

Alternative support  

The FCA has asked lenders for their input on whether any aspect of their current support should continue beyond 31 October and if not, what should take its place. 

In June and July, the regulator updated its guidance to say that as payment deferrals may not be the right solution after six months, lenders should consider reducing payments to a level borrowers could afford as well as potential further deferrals. 

It has also asked for respondents’ views on whether there is a case for further payment deferral, especially for borrowers whose terms end before the Coronavirus Job Retention Scheme so they can have more certainty on their financial situation. 

This could help lenders make a more informed decision on a consumer’s circumstances so they can decide what extra support may be appropriate. 

The FCA also proposed that firms may need to focus on more sustainable forbearance options in the future. These could include typical options such as rescheduling, reducing or deferring payments of capital or interest, fees or charges or the repossession of their home or other security. 

Understanding consumers 

The FCA laid out potential areas for further guidance or rules, including the provision of support for consumers before they face payment difficulty.

And it has requested responses to understand the needs of vulnerable customers when temporary measures end and how to identify if different groups of customers needed different levels of help. 

It also asked if firms predicted any challenges arising from collecting necessary information from consumers to help them judge what forbearance would suit each circumstance. 

This will be to avoid poor outcomes and make sure firms have the capacity to deal with the volume of affected consumers. 

Firms have also been asked to consider what more can be done for the 15-30% of consumers with multiple debts.

As they are more likely to be vulnerable, the FCA wants to explore how they can be dealt with holistically without referring them to debt advice to avoid the pressure on the debt advice sector. 

The deadline for responses is 7 August, with draft guidance for mortgages to be published in late August and the final guidance in early September. 

Draft guidance for consumer credit will be published mid-September and the final guidance at the end of September.

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