FCA Eyes New Aid For Mortgage Payers Amid Virus Crisis

By Lucia Osborne-Crowley
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Law360, London (August 26, 2020, 5:04 PM BST) -- Britain's finance watchdog said Wednesday it may extend mortgage "holidays" for home-owners hit hard by the COVID-19 crisis and continue to offer support for those who need to apply for it for the first time since the crisis hit.

The Financial Conduct Authority has published draft guidelines that would ensure finance firms continue to offer payment freezes for consumers who cannot make mortgage payments because of the financial fallout of the COVID-19 crisis. The guidelines would also instruct lenders to offer financial help to those who have been newly affected by the crisis.

"We understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income," Christopher Woolard, interim chief executive at the FCA, said.

"We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track," he added.

Lenders should consider short-term assistance including extending payment terms or restructuring mortgages, the watchdog said.

Woolard warned banks and building societies against taking a "one size fits all" approach to offering financial help. The FCA also stressed that lenders should give priority to customers who are facing the most severe financial difficulties or are at risk of harm.

Lenders should also help customers by giving them advice on how to manage their money or referring them to debt advice where necessary, the watchdog said.

Consumers who request help under the new guidelines will have this reflected on their credit score, the FCA said, to make sure lenders are clear about their customers' financial position. The regulator said companies should make sure they tell customers that the financial help will affect their rating.

The sector has until Sept. 2 to comment on the proposals. The FCA did not say when they will take effect.

Mortgage lenders agreed to mortgage payment freezes in March after Chancellor of the Exchequer Rishi Sunak announced the stopgap as part of an "unprecedented package" of government-backed loans worth £330 billion ($435 billion).

The initial payment holidays were slated to last for six months, but the regulator announced a three-month extension in June.

The FCA has also announced payment freezes for loans and high-cost credit amid the pandemic.

In April, the regulator announced new rules to force banks and lenders to freeze payments and interest on high-cost credit products such as payday loans. The measures hit pause on payments on car finance, rent-to-own contracts and buy-now-pay-later and freezing payments as well as interest for payday loans.

It also announced freezes on all loan and credit card payments during the pandemic. The measures were intended to provide temporary relief for bank customers who have fallen ill or been laid off or furloughed during the global pandemic and are struggling to make repayments.

--Additional reporting by Joanne Faulkner and Najiyya Budaly. Editing by Marygrace Murphy.

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