Coronavirus and customers in temporary financial difficulty: proposals to extend guidance

27 July 2020

The FCA has announced proposals to extend a series of temporary measures designed to help customers holding insurance and premium finance products and who may be experiencing temporary financial difficulty as a result of coronavirus (the Proposals). The temporary measures originally came into force on Monday 18th May 2020 and were discussed in our earlier articles here and here. The FCA committed to reviewing the temporary measures after 3 months.

The FCA has now asked for all stakeholders to respond by 5pm on Tuesday 28th July 2020 on its proposal to extend the temporary measures until 31st October 2020.

Under the Proposals, firms must continue to consider what options could be offered to customers. If a payment deferral is not in a customer’s best interests, options could include reducing premiums as a result of a change in risk profile, offering an alternative product which would better meet the customer’s needs or waiving fees associated with altering cover. Firms will be expected to grant a payment deferral of between 1 and 3 months if amending the insurance cover does not alleviate the customer’s temporary financial difficulties.

The Proposals also outline the FCA’s expectations as to what should happen at the end of a payment deferral. If a customer is entitled to forbearance at the end of a payment deferral, the firm should treat the customer in accordance with the relevant rules. Examples of forbearance (as detailed in CONC) include suspending, reducing or cancelling any further interest or charges, allowing deferment of payment or arrears or accepting token payments for a reasonable period of time, allowing a customer to recover from an unexpected income shock. Should a firm choose to apply the same solution for all customers, it is likely to be contravening the FCA’s Principle 6 around treating customers fairly.

Where forbearance is applied firms will need to consider carefully how to deal with statutory notices that must continue to be sent, such as annual statements and notices of sums in arrears.

The Proposals have also been updated to include additional requirements for training, monitoring, record keeping and Credit Reference Agency reporting, in line with the FCA’s coronavirus guidance relating to other credit products.

The FCA emphasised that it is important that customers remain insured, and that the insurance cover they hold meets their needs. If customers are struggling to afford their insurance of premium finance payments due to the impact of coronavirus, the FCA suggests they should contact their insurer or insurance broker to discuss the options available to them.

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