Mortgages: Proposed changes
The FCA’s mortgages draft guidance proposes to extend the repossession ban so that firms cannot enforce repossessions before 1 April 2021.
The deteriorating coronavirus situation and the government’s tightening of restrictions mean that consumers could experience significant harm if forced to move home at this time, as a result of repossession proceedings. Further, there are government bans on evictions in some nations, which could also prevent firms from enforcing home repossessions.
Consumer credit: Proposed changes (including motor finance)
The current guidance states that before 31 January 2021, firms should not terminate a regulated agreement or repossess goods or vehicles under the agreement that the customer needs, except in exceptional circumstances. Unlike mortgages, the repossession ban on goods and vehicles is not proposed to be extended. The proposed changes instead would allow consumer credit firms to repossess goods and vehicles from 31 January 2021.
In considering whether it is appropriate to repossess goods or vehicles, the FCA emphasises that firms should take account the financial impact of delaying repossession, including asset depreciation and the wider impact of repossession on such customers. Firms must also take care to ensure customers continue to be treated fairly in considering whether and when to take steps to default or terminate the agreement, and should comply with the relevant provisions found within the Consumer Credit Act 1974, including section 87 (default notices) and section 90 (retaking protected hire purchase goods).
Firms will also be expected to consider the impact on vulnerable customers (including those who are vulnerable as a result of the pandemic), in deciding whether such repossession is appropriate.
FCA approach
The regulator’s approach reflects the different risks and harms that customers with goods or vehicles on credit are likely to face compared to those who are at risk of losing their home.
The FCA is providing adequate protections by ensuring firms repossess only as a last resort, consider the impact of repossession on vulnerable customers and follow relevant government public health guidelines and regulations.
Next steps
The FCA is requesting comments on the draft guidance documents for mortgages and consumer credit by 10am on Monday 18 January 2021.
The FCA stated it intends to keep the support offered to consumers under review.
Article co-authored by Anna Burdzy.
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