FCA publishes policy statement and finalised guidance on ways consumer credit and mortgage firms should support customers in financial difficulty

Earlier today, on 10 April 2024, the UK Financial Conduct Authority published a press release and Policy Statement, PS24/2, setting out the new rules and guidance which will apply to consumer credit and mortgage firms to support customers in financial difficulity.

The FCA has also published updated finalised guidance, FG24/2, and a press release.

The changes made to both CONC and MCOB by PS24/2, and FG24/2, will come into force on 4 November 2024.

We’ve set out a summary in a one page infographic (if you click the infographic it should be larger):

If you want a PDF copy, please contact your usual contact at Walker Morris LLP.

FCA publishes data on Mortgage Charter uptake

On 22 March 2024, the UK Financial Conduct Authority published data on firms who have signed up to the Government’s Mortgage Charter.

The key points are:

– There are 48 signatories to the mortgage charter (making up around 90% of the mortgage market).

– The data suggests at least 760,000 accounts benefitted from one or more of the options set out in the Charter.

– Around 90,543 mortgage accounts have temporarily reduced their monthly payments under the FCA new rules.

– Between July 2023 and January 2024, the monthly payments on around 123,000 accounts were reduced as people switched to temporarily paying interest-only or extended their mortgage term (making up around 1.4% of the regulated mortgage contracts). Only 103 term extensions were reversed.

– The data says 67 properties were repossessed within 12 months of missing the first payment. Firms say these were for customer-driven reasons.

– It is difficult to estimate the total number of borrowers who have taken up one or more of the options set out in the Charter.

– The FCA reminds firms that the options under the Charter form only part of the support. All borrowers can contact their lender and discussion their options (see, for example, the industry’s ‘Reach Out’ campaign. This support could include contract variations or appropriate forbearance measures.

The Mortgage Charter and changes to MCOB to help borrowers

Mortgage lenders have had a busy time recently. The Government has published the Mortgage Charter (which is a voluntary charter that first charge lenders can sign up to) and the FCA has published Policy Statement 23/8 to enable firms to do what the charter requires. For more on the changes to MCOB, please see my earlier post.

We’ve put our heads together at Walker Morris towers to produce a one page summary of what the changes are and what firms need to do. If you click on it, you’ll get a bigger version of it.

If anyone needs a PDF copy with the embedded links (shown in the image as underlining), please contact me, Jeanette Burgess or Hasan Siddique.

FCA publishes Handbook Notice 110 setting out changes to CONC and MCOB

At the end of June 2023, the UK Financial Conduct Authority (the FCA) published Handbook Notice 110. This set out changes made to the FCA Handbook 2 June 2023 and 30 June 2023. These include:

– changes to CONC 8.3 and TP8 (and changes to PERG 2.9 and PERG 17.7) resulting from the Consumer Credit (Debt Packager Remuneration from Debt Solution Providers) Instrument 2023. This introduces rules and guidance banning debt packers from receiving remuneration from debt solution providers and came into force on 2 June 2023.

– changes to MCOB 11.6 resulting from the Mortgage Affordability Rules (Amendment) Instrument 2023. This implements the Mortgage Charter and allows lenders to offer borrowers a switch to interest-only repayments for six months and a term extension to reduce their monthly repayments and switch back within six months (for more, please see Policy Statement 23/8: Mortgage Charter: enabling provisions and the FCA’s press release). These changes came into force on 30 June 2023.

FCA publishes final report on strategic review of retail banking business models 

On 20 January 2022, the UK Financial Conduct Authority published its final report following its strategic review of retail banking business models, together with a webpage and press release.

This report follows the FCA’s progress report from June 2018.

The key points from the final report are:

– large banks have a strong position but are facing challenge from others;

– low levels of consumer engagement have historically contributed to high barriers to entry and expansion;

– digital challenges have rapidly gained a share of the personal current account and business current account markets

– competition in the mortgage market has increased (causing yields to come down)

– yields for consumer credit firms have fallen too (particularly on unarranged overdrafts);

– large banks did proportionately more micro-business lending under the government schemes than most other banks; and

– increased competition and innovation have improved outcomes for many consumers and some small businesses.

The FCA says it will be “discussing the points raised in our 2022 Final Report with firms and consumer organisations but are keen to hear from other stakeholders”. The FCA has invited written submissions by 31 March 2022.

Financial Conduct Authority publishes terms of reference for mortgage prisoner review

Earlier today, on 20 July 2021, the UK Financial Conduct Authority published its terms of reference setting out the steps it proposes to take in its mortgage prisoner review.

The FCA estimates there are around 250,000 borrowers who have mortgages with ‘inactive firms’ (ie firms which are either not lending to new customers, or are not lenders). The FCA accepts that “[n]ot all of these borrowers are mortgage prisoners”. The FCA says mortgage prisoners are “borrowers who are unable to switch to a new mortgage deal despite being up to date with their mortgage payments and, depending on their loan and borrower risk characteristics, could potentially benefit from switching”.

The FCA intends to review two areas:

a data review: this will review and update the FCA’s data to consider the demographic and loan characteristics of mortgage prisoners; and

an interventions review: this will review the effectiveness of the FCA’s recent interventions to remove regulatory barriers to switching (focussing on the modified affordability assessments and the intra-group switching rule change).

The FCA expects to undertake its data review and analysis between July and October 2021. It also expects to engage with interested stakeholders between July and August 2021. The FCA expects to report to HM Treasury by the end of November 2021.

Policy Statement published on changes to FCA Handbook to reflect breathing space

On 26 February 2021, the FCA published Policy Statement 20/1: ‘Breathing Space Regulations – changes to our handbook’ (‘PS 20/1’) to make changes to the Consumer Credit Sourcebook (or ‘CONC’) to implement the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium (England and Wales) Regulations 2020 (which come into force on 4 May 2021).

The changes (which come into force on 4 May 2021) are:

– two new definitions will be introduced: ‘Debt Respite moratorium’ and ‘moratorium debt’;

– CONC 5D.3.3G(5) will be amended to say that if a Debt Respite moratorium is in effect for a customer’s overdraft and a firm is complying with its obligations under that moratorium, the firm is treating the customer with appropriate forbearance for the portion of the overdraft subject to the moratorium (and the firm is not required to take the steps under CONC 5D.3 during the moratorium);

– there will be changes to CONC 6.7 so that complying with a Debt Respite moratorium is considered to be compliance with a firm’s obligations under CONC 6.7 (in effect, a moratorium is equivalent or more favourable steps); and

– firms can take into account the period under a Debt Respite moratorium when considering a ‘reasonable period’ under CONC 7.3.11R.

The FCA does not consider any changes are necessary to CONC 8, or to MCOB.

PS21/1 makes it clear that “consumers ought to be able to benefit from the protections of both the Regulations and our rules” (see paragraph 1.14). The FCA’s view is that “advising a customer on eligibility for a moratorium clearly falls within the regulated activity of debt counselling”.

The FCA also says that any “communications required by our rules should continue to be made. The Regulations do not prevent a credit from contacting a customer where this is required under the Consumer Credit Act 1974 (CCA) or FCA rules (Regulation 11). Section 3.9 of the Insolvency Service’s guidance also explains the effect of the Regulations on communications with customers” (see paragraph 3.5).

The FCA says MCOB does “not require firms to inform customers about breathing space specifically, but a firm may choose to do so” (see paragraph 3.7).

Butterworths Financial Regulation Service – updated commentary on CONC and MCOB, and new commentary on BCOBS, published

Issue 113 of Butterworths Financial Regulation Service has now been published. I’ve written a new chapter on CONC 8, and reviewed and revised the existing chapters on CONC (including adding the latest COVID-19 guidance published by the Financial Conduct Authority).

I’ve also written new chapters on MCOB 2A, 3B, 4A and 6A, and reviewed and revised the existing chapters on MCOB.

I’m also delighted to have published brand new commentary on BCOBS. There will be additional new chapters over coming issues but this issue has:

– an introductory chapter on BCOBS; and

– commentary on BCOBS 1, 2, 2A and 3.

FCA announces further proposals to support mortgage borrowers impacted by COVID-19

Late yesterday afternoon, on 2 November 2020, the UK Financial Conduct Authority published a press release setting out its further proposals to support mortgage borrowers impacted by COVID-19. There is a draft further updated guidance for firms and a draft updated additional guidance for firms.

The FCA proposes:

– those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total;

– those who have had one payment deferral, will be eligible for another payment deferral of up to three months;

– those who have restarted repayments after an initial payment deferral will be eligible for another payment deferral of up to three months

– to allow borrowers until 31 January 2021 to ask for a payment deferral;

– if borrowers can afford to make repayments then they should continue to do so;

– borrowers should hold off contacting their lender until the enhanced measures are in place; and

– to stop any repossessions (without the borrower’s consent) before 31 January 2021.

The FCA has invited comments by 10am on 5 November 2020.

FCA to announce further support for mortgage borrowers

On 31 October 2020, and following the Prime Minister’s announcement of a further month-long lockdown for England, the UK Financial Conduct Authority issued a press release saying it will announce further support for mortgage borrowers on 2 November 2020.

It seems likely that:

– If a mortgage borrower has not had deferral already because they are unable to make their repayments because of COVID-19, they will be entitled to ask for deferral of up to six months.

– If a mortgage borrower has already had a payment deferral because of COVID-19 of less than six months, they will be entitled to ask for another deferral so the maximum total deferral is six months.

– If a mortgage borrower has already had a payment deferral because of COVID-19 of six months, and are still unable to make their repayments because of COVID-19, they will need to contact their lender for ‘tailored support’.

The FCA is also considering the implications of this approach for the consumer credit industry.

UK Finance and the Building Societies Association have published a joint press release following the announcement.