FCA updates COVID-19 guidance for credit card providers

The FCA has, this morning, published its draft guidance clarifying the continued treatment of customers experiencing temporary financial hardship due to COVID-19.  The FCA is welcoming comments on the proposals until 5pm on 22 June 2020 with the guidance coming into force shortly after that.

The guidance which expires on 31 October can be summarised as follows:

Customers who have not yet had a payment deferral.

• The same information/communication requirements apply as set out in earlier guidance
• These customers should be permitted a 3 month deferral (assuming they qualify and it’s in their best interests to do so (same criteria as earlier guidance)
• If a 3 month deferral is not appropriate, firms should offer alternatives (e,.g partial payment deferral)
• As a result CONC 6.7.5R will not apply to these customers (minimum repayment requirements).

Interaction with the Persistent Debt Rules

• CONC 6.7.2R to 6.7.40G has been suspended for customers who have been granted an initial or further payment deferral.
• Where a customer has not been given a further payment deferral, these CONC provisions will resume for that customer:
  • the payment deferral period will count towards the persistent debt assessment (although the date of the assessment will likely be delayed):
    • 18 month communications will be assessed in the month following the end of the a payment deferral;
    • 27 month communication – if it would have fallen during a payment deferral, it must be given to the customer at the end of the payment deferral.  This should be tweaked to explain that the persistent debt rules have recommenced and the usual implications should be included;
    • 36 month communications that fall during a payment deferral will be picked up again at the end of the deferral when firms should work with customer to repay their debt in line with CONC 6.7.30R.
  • firms should take account the duration of any payment deferral when considering what is a “reasonable period” for CONC 6.7.31R.

Expectations in relation to credit card rates

Firms must review their prices to ensure they are consistent with Principle 6 (TCF) to ensure that the prices do not pose unjustifiable burdens on customers who may be experiencing temporary payment difficulties.

Fair treatment of customers at the end of an initial payment deferral period

Individual assessments will need to be undertaken on each customer to ensure that their treatment is compatible with Principle 6 and firms should distinguish between:

• customers who’s payment difficulties have ceased; and
• customers who are still experiencing temporary payment difficulties due to COVID-19.

Firms don’t need to comply with, or follow CONC 6.7.3AR to 6.7.3BG, CONC 7.3.3G to 7.3.6G and CONC 7.3.8G when acting under the guidance (except where the guidance confirms firms should).

Understanding customers’ financial circumstances at the end of an initial payment deferral period

The same communication requirements exist but the FCA has confirmed that the communication can be done through a digital or scripted process.

The communication should include information about the date of the next payment and how the deferred amounts will be treated.  The FCA has clarified that if a customer doesn’t respond the firm can assume that the customer is no longer experiencing temporary payment difficulties.

Firms can use other sources of data to help assess whether customers are still experiencing difficulties (such as payment history, credit reference data or open banking sources).

Customers no longer experiencing temporary payment difficulties as a result of coronavirus

Where customer has been assessed as no longer experiencing temporary payment difficulties but then misses the first payment back, firms should make reasonable attempts to contact them.

If the customer subsequently confirms that they are still experiencing difficulty, firms should offer additional help:

• a further 3 months partial or full payment deferral should be offered (the level depends on the customers’ individual circumstances).  If this is not the best course of action, the firm can:
  • provide the customer with CONC 6 or 7 forbearance
  • grant a payment deferral of an amount different to what the customer indicated they can afford
  • provide a payment deferral of less than 3 months
• in all cases firms can waive interest if they feel that is the best course of action;
• where firms are dealing with a debt counsellor on behalf of the customer (CONC 8.3.2R) the debt counsellor’s view as to whether a payment deferred is in the customer’s interest prevails over the firm’s opinion.

**Importantly – the FCA has confirmed that a firm adopting a single solution for all customers requiring further support at the end of a payment deferral period is likely to contravene Principle 6.**

The same operational and communication guidance also applies to further payment deferrals granted.

Interest Waiver

The FCA expects firms to waive any accrued interest in relation to a payment deferral period (of any length) in the following circumstances:

• where the customer, at the end of the initial payment deferral period, was not given a further full or partial payment deferral of any length under this guidance and was entitled to forbearance under CONC 6 or 7, additional interest accrued as a result of the initial payment deferral period should be waived as soon as reasonably practicable at the end of the initial payment deferral period;
• where the customer was given a further full or partial payment deferral of any length under this guidance and, at the end of that period, continues to have payment difficulties and is entitled to forbearance under CONC 6 or 7, additional interest accrued as a result of both the initial and further payment deferral should be waived as soon as practicable at the end of the further payment deferral period.

At the end of the payment deferral period, if a customer confirms they are no longer in difficulties, firms do not need to waive accrued interest.

NOSIAs and other communications

Where firms are required to send NOSIAs and other information to customers, firms should consider whether these should be accompanied by contextualised information to reduce the risk of any customer confusion.  This information should be clear, fair and not misleading.

Training, monitoring, record keeping and CRAs

The same reporting and training requirements exist and the FCA has reiterated that credit reporting should be done in line with the CRAs Coronavirus Data Reporting Guidance.

Debt help and money guidance

The FCA also have added some suggested debt advice signposting that firms may wish to provide to their customers.

Finally (and really importantly!)

Firms must assess if they have treated customers who have already come to the end of their payment deferral period prior to the publication of this guidance, in line with the guidance.

If the treatment is inconsistent, firms should make reasonable efforts to contact affected customers to give them the opportunity to take up any further help they may be eligible for.