Following the consultation at the start of July, the FCA has today clarified the latest rules for how firms should deal with motor finance, BNPL, TRO and pawnbroking customers coming to the end of payment freezes.
These new rules coming into effect on 17 July and, unless renewed or updated, generally expire on 31 October 2020. They take the form set out in the earlier consultation subject to the following points of clarification:
- Interest should continue to accrue on all products during any payment deferral period.
- Where the forbearance measures are creating liquidity risks, the firm should contact the FCA at the earliest opportunity.
- Where customers do not respond or engage with firms, the FCA has confirmed that firms can proceed on the basis that the customer can resume repayments.
- Firms should continue to issue NOSIAs etc but make sure that they are accompanied by contextual information so that customers aren’t confused.
- The measures must also be adopted by firms in administration.
- Firms should encourage customers in financial difficulty to seek debt advice but granting payment deferrals should not be conditional on this.
- Repossessions can recommence in exceptional circumstances e.g once a customer has consented to it. However, the consequences of suspending repossessions should be made clear to customers at all times.
- The FCA confirms that firms can adjust GMFVs or residual values, provided they maintain fair treatment of customers.
- re interest waivers, the FCA confirms that where customers require further forbearance at the end of a payment deferral period, any interest that would not have accrued but for the payment deferrals should be waived.
- The FCA confirms that the maximum payment deferral period can be 6 months.
- The FCA clarified that a further payment deferral is unlikely to be in a customer’s best interest where there is significant equity in a pawn and the customer has little prospect of using the extra time to redeem.
Hugh-cost short-term credit
- The FCA notes that firms are only required to give one payment deferral in respect of each loan but that it may be deemed relevant to provide a further payment deferral as part of further forbearance measures.