As England emerges from its second lockdown, many households are facing severe financial difficulty. Some for the first time and some since April – the start of the global crisis caused by the coronavirus pandemic. An FCA survey showed in July 2020, 12 million UK adults had low financial resilience and the data shows 2 million of those who are not financially resilient have become so since February 2020.

The impact of COVID-19 has meant financial support information and what we can access changes rapidly.

For those affected financially, who may not be able to keep up with repayments from credit providers, the key message is; don’t not pay and talk with your provider about your problems, to help find an affordable solution going forward. Likewise, the FCA has issued continued guidance to firms confirming they must provide tailored support to consumers who need it.

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “The FCA was right to respond quickly to this second lockdown, which will unfortunately see many more households fall into financial difficulty – some of them for the first time.

“Extending the availability of payment deferrals on both mortgages and consumer credit is a sensible approach.”
She added: “More widely, it is becoming increasingly clear that the Government will have to extend its £20 a week uplift in Universal Credit beyond April. It would be better to announce this now, to give people who have lost their jobs some reassurance that this additional support will not be withdrawn in just a few months’ time.”

What are the most recent announcements and next stages for consumer credit, mortgages and overdraft customers?

With the fear that many Brits will fall into a debt trap, the FCA have been advising firms how to act and how they must get their customers to take action. FCA advice is for consumers to not bury their heads in the sand and if repayments of any credit type cannot be meet, speak sooner rather than later to your lender.

Many reports have been published on the FCA’s guidance as the pandemic evolves, here’s a quick Q4 2020 summary:

FCA Guidance September / October 2020

FCA confirms next stage of support for consumer credit and overdraft customers after payment holiday application was due to end on 31st October 2020. (issued: 02.10.2020)

Who? Users of credit cards and other revolving credit, personal loans, motor finance, buy-now pay-later, rent-to-own, pawnbroking and high-cost short-term credit products and overdrafts.

Why? FCA needed to ensure firms would tailor an approach for each and every customer that was still in financial difficulty after their July guidance came to an end on the 31st October 2020, which was the original date the payment deferral application was due to end.

How? Firms were advised to give a hands-on, case-by-case tailored approach to every customer. Ensure prevention of customers’ balances from escalating. And put in place affordable repayment arrangements by suspending, reducing, waiving, or cancelling any interest, fees, or charges.

When? This guidance came into force on 2nd October 2020.

FCA New Guidance November 2020

As a result of the restrictions put on the UK in October 2020, and the subsequent news of the second lockdown, the FCA confirmed the extension of applying for a payment deferral on both mortgages and consumer credit.

Proposals were announced early November, with subsequent announcements of confirmation later in the same month, which extends applications as far as July 2021.

FCA confirms support for mortgage borrowers affected by the pandemic until 31st March 2021

  • FCA enhances support available to mortgage borrowers, with updated guidance.
  • Mortgage deferral applications for payment breaks until 31st March 2021.
  • After 31st March 2021, customers can extend existing deferrals to 31st July 2021 (subject to maximum of six months).
  • Separate FCA guidance for interest-only or part-and-part mortgage borrowers affected by the crisis.
  • FCA confirms no one should have their home repossessed without their agreement until after 31st January 2021.
  • This guidance came into force on 20th November 2020.

Loans, credit cards and other revolving credit: how FCA guidance supports all users into 2021

  • FCA extends applications for payment breaks until 31st March 2021.
  • Extension help will cover users of credit cards, (other revolving credit) personal loans, motor finance, buy-now-pay-later and pawn broking credit.
  • FCA states that firms will continue to tailor support to overdraft borrowers, as per guidance set out in September.
  • FCA confirms tailored support by firms to customers after they’ve had a 6-month payment holiday and are still affected. By putting in place affordable repayment arrangements, by suspending, reducing, waiving, or cancelling any interest, fees, or charges.
  • This guidance came into force on 25th November 2020.