FCA call for input: Further Support for Mortgages and Consumer Credit - Which? response

Summary: 

• Which? welcomes the opportunity to respond to the FCA’s call for input on how support can be provided to consumers after temporary relief measures come to an end on 31 October 2020. We commend the pace at which the FCA has acted across a range of issues in recent months.
• We are concerned that the call for input suggests a preference to end payment holidays after 31 October, as we are seeing evidence of financial distress among those whose incomes have been affected by the pandemic. We also expect this to rise as consumers who have not needed to defer payments so far might require support following a loss of employment and income after October.
• Which? recommends that the FCA:
  • does not revert to existing forbearance rules after 31 October as we are likely to see a rise in consumer detriment. MCOB and CONC rules are less prescriptive around the support that firms should provide and we are concerned about the ability of firms to provide the tailored support that would be required, given the difficulties that consumers are currently experiencing when contacting lenders.
  • extends the current support by a further three months to ease the impact of the Job Retention Scheme (JRS) ending. While we acknowledge that payment holidays are not a long-term solution, and it remains in a consumer’s best interest to repay where they can ,this extension is particularly needed for these products as the risk of harm can be significant. Forbearance should also be widened (where another deferral is not in the consumer’s best interests) to require lenders to offer a rescheduling of payments or freezing interest, rather than just considering these options. Longer term measures to support consumers impacted by coronavirus should be considered when the impact of the JRS ending will be more known, and with a longer consultation process. Therefore, we do not consider it appropriate for the FCA to move forward on many of the proposals in the call for input, to which such little time has been afforded.
  • does not allow normal Credit Reference Agency reporting to resume. The principle that these extenuating circumstances have created temporary financial difficulties should continue to apply. Therefore, under the extended guidance, access to payment deferrals (for those already in place and for those newly granted over the next three months) should not have a long-term impact on creditworthiness.
  • temporarily reduces timescales relating to forbearance complaints to ensure that consumers get the urgent support that they need. We have seen instances where the timeliness of resolving complaints has negatively impacted consumers’ financial circumstances.