Coronavirus - FCA finalises guidance to support consumer credit customers - UK

• United Kingdom

• Coronavirus - Country overview
• Payment systems and digital commerce

30-04-2020

On Friday 24 April, the FCA confirmed measures to support consumer credit customers facing financial difficulty as a result of COVID-19 on motor finance agreements, Buy-Now-Pay-Later (‘BNPL’) contracts and other high cost credit agreements. These measures have come into force on Monday 27 April.

These measures are based on the draft rules and guidance proposals issued by the FCA for consultation on Monday 20 April, as reported in our previous briefings (Motor finance and BNPL) on this topic.

The FCA has also published a feedback statement FS20/4.

We summarise the key updates and clarifications introduced in the final sets of guidance for motor finance and BNPL as follows.

Motor Finance

The final guidance largely reflect the draft proposal with the following clarifications:

Scope

The FCA has clarified that these measures cover relevant restricted use agreements. Accordingly, the scope now includes “debtor-creditor-supplier agreements or restricted-use debtor-creditor agreements” used to purchase vehicles in addition to hire purchase agreements (such as personal contract purchase (PCP) agreements), conditional sale agreements and personal contract hire (PCH) agreements. 

Whilst the FCA also clarified in its feedback statement that motor finance agreements entered into for business purposes are not within scope of the measures, it expect firms to apply the FCA principles when dealing with customers party to such agreements. Similarly, logbook loans and secondary loans associated with motor finance agreements do not fall under the scope of these measures but may fall under the scope of measures put in place for personal loans.

GMFVs/RVs

The FCA has clarified its guidance that firms should treat customers fairly when adjusting GMFVs/RVs in all circumstances, and not just when entering into new agreements. In its feedback statement, it has also confirmed that firms can make the adjustments in line with ‘normal’ trading conditions so long as customers are treated fairly.

SORN

The FCA has removed a direction to firms to remind customers to make a SORN declaration. The customer should instead engage with the firm to agree next steps.

Buy Now Pay Later (BNPL)

The final guidance for BNPL contains several key updates and clarification to the draft:

Scope

The FCA has confirmed that these measures will apply to BNPL credit as follows:

• for fixed sum agreements, only this guidance applies

• for running account agreements, both this guidance and the guidance on credit cards and retail revolving credit will apply (either individually or together).  

Payment deferrals

Where the customer is granted a payment deferral and there is a balance subject to a promotional period, firms should extend the promotional period by 3 months, regardless of when the promotional period ends. The final measures have been amended to reflect this point.

Where the balance is not subject to a promotional period: for a running account agreement, the credit cards and retail revolving credit guidance will apply; for a fixed sum agreement a payment deferral of 3 months should be provided under this guidance.   

Where firms cannot extend the promotional period because of system or operational limitations, the FCA has confirmed that it will recognise alternative solution offers to customers so long that these offers deliver the same economic relief to customers.

What’s next?

These measures will be reviewed by the FCA over the next three months. If you are experiencing any challenge in implementing any items from this new guidance the FCA recommends in its feedback statement that you contact them at the earlier opportunity.

If you need any assistance in relation to any of the FCA’s COVID-19 guidance please do get in touch.