The FCA has updated its Payment Deferral guidelines, providing useful new advice on how to deal with Payment Deferral, vulnerable customers and Tailored Support for customers over the coming months.

Earlier this year, the FCA issued Payment Deferral guidance to Firms in order to set expectations around management of the impact of Coronavirus and the Government imposed lockdown on customer’s personal circumstances. In particular, many customers faced income shocks as a result of unemployment and furlough which this guidance sought to support.

This guidance was scheduled to expire on 31st October; however this has now been revised and updated by the FCA allowing for an extension to the deadlines for eligibility to access a Payment Deferral and introducing new requirements for firms to offer Tailored Support to Customers who have benefited from 6 months of payment deferrals and are no longer eligible to access this scheme. The new deadline to be able to apply payment deferrals is March 31st with payment deferrals not running beyond July 31st.

For both Secured and Unsecured Customers the accessibility criteria for the scheme can be summarised as follows:

  • Customers who have not yet had a payment deferral are eligible for payment deferrals of 6 months in total.
  • Customers who currently have a payment deferral or who have previously had payment deferrals of less than 6 months are eligible to top up to 6 months deferral in total. This includes customers receiving tailored support and those who are behind on payments.
  • Finally, Customers who have already had 6 months of payment deferrals are not eligible for a further payment deferral. Instead, Firms will provide tailored support appropriate to circumstances (this may include the option to defer further payments).

The requirements at the end of a Payment Deferral remain the same as in previous guidance. Firms are expected to proactively contact customers in good time before the end of a Payment Deferral period about resuming payments and to engage with them about their options when it expires.

After Payment Deferrals have been used up by Customers, Firms must adopt Tailored Support measures to assist customers. The FCA have stated they expect firms to be flexible and employ a full range of short and long-term forbearance options to support their customers and minimise avoidable financial distress, stress and anxiety experienced by customers in financial difficulty.

Firms are expected to consider a range of forbearance options when dealing with customers. This could for example include:

  • Suspending, reducing, waiving or cancelling any interest or charges.
  • Permitting the customer to make no or reduced payments.
  • Allowing the customer a reasonable time and opportunity to repay the debt, including by deferment of payment of arrears.
  • Accepting token payments for a reasonable period.
  • Agreeing a repayment plan.

All decisions should be supported by undertaking an Income and Expenditure Assessment where appropriate. The requirements to identify and manage Vulnerable Customers does not change as a result of this guidance. Customer facing colleagues should however be aware that it is likely that more Customers will become Vulnerable as a result of the Pandemic and its effects on people’s lives. Firms should therefore take particular care to ensure they respond to the needs of vulnerable customers at the greatest risk of harm.

Where Customers could benefit from debt advice the FCA expect Firms to inform the customer that free and impartial debt advice is available from not-for-profit debt advice bodies; and signpost or refer them to one or more sources of such free advice.

If you would like to discuss this new guidance further, please contact me, Glen Walker, at Glen.Walker@ascent.co.uk or 07860660656.