The Financial Conduct Authority (FCA) has updated its guidance to consumer credit firms, regarding the support they must give borrowers experiencing payment difficulties during the pandemic.
The City watchdog’s updated guidance covers users of personal loans, credit cards, store cards, catalogue credit, rent to own, buy now pay later, pawnbroking, motor finance and high-cost short-term credit.
The guidance says that consumers that have not yet had a payment holiday will be eligible to apply for payment deferrals of up to six months, and those who currently have a payment deferral can apply for another one, as long as the total length doesn’t exceed six months.
Consumers who have previously had a payment holiday of less than six months will also be eligible to apply for a further payment deferral, as long as they don’t exceed six months in total.
If customers have already had six months of payment holidays, are in arrears, or the lender does not feel a payment deferral is appropriate, the FCA said lenders should provide tailored support appropriate to the customer’s circumstances.
And high-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of just one month.
“It is in a consumer’s best interest to only take a payment deferral when absolutely necessary,” said Sheldon Mills, interim executive director of strategy and competition at the FCA.
“Those that are able to keep paying should do so.
“However, for those continuing to face payment difficulties as a result of coronavirus, these measures will ensure they continue to be able to access much needed support during this crisis.
“We also want to highlight that tailored support will still be offered and remains the most appropriate option for many borrowers.”
The regulator said that tailored support may be reported on a consumer’s credit file while a payment holiday would not.
However, this does not mean that consumers’ ability to access credit will be unaffected, as lenders may take into account a range of information when making lending decisions.
The guidance will come into force on 25 November but the FCA has encouraged firms that are able to start providing this enhanced support sooner to do so.