FCA Extends Relief For Borrowers Amid Renewed Lockdown

By Najiyya Budaly
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Law360, London (November 2, 2020, 1:06 PM GMT) -- The Financial Conduct Authority said on Monday that it plans to extend relief measures for people struggling to make consumer credit and mortgage payments after the government announced a new lockdown for England.

The City watchdog said that it is proposing to extend the availability of payment breaks for consumers who cannot afford to pay back credit card debts, personal loans and car finance because of the economic impact of the COVID-19 pandemic.

The regulator said it acted in response to the government announcing a new lockdown to control a second wave of the pandemic in England. Prime Minister Boris Johnson said on Saturday that the restrictions would be in place across the country from Thursday until Dec. 2.

The FCA initially announced the debt freezes in April to provide temporary relief to consumers who were facing default because they could not work or fell ill during the coronavirus outbreak. The watchdog extended the measures in July until Oct. 31.

Banks can provide relief for up to six months for customers who have not had a payment freeze under the regulator's July guidance. Borrowers who have already benefited from a deferral since July can also apply for a second one, the FCA said in its latest proposals.

"It is important that consumer credit customers who can afford to do so continue to make repayments," the regulator said on Monday. "Borrowers should only take up this support if they need it."

The FCA said that payday lenders can also grant payment freezes for one month to borrowers who have not already had one.

But the watchdog told consumers on Monday not to contact their lenders yet. Lenders should tailor support in the meantime to customers who are in financial difficulty.

"We will work with trade bodies and lenders on how to implement these proposals as quickly as possible, and will make another announcement shortly," the watchdog said.

The FCA also said on Saturday that it will update its guidance to support mortgage borrowers. Banks and building societies can hand so-called payment holidays to home-owners for up to six months if they have not had a deferral.

Borrowers who have already had a payment break on the home loan for less than six months can also request to extend the holiday under the FCA's proposed measures.

"This would mean customers would be able to have a payment deferral for a maximum of six months," the watchdog said Saturday. "Mortgage borrowers who have already benefited from a six-month payment deferral and are still experiencing payment difficulties should speak to their lender to agree tailored support."

British lenders agreed in March to allow mortgage payment freezes that were initially intended to last for six months. But the regulator announced a three-month extension in June until the end of October.

--Editing by Ed Harris.

For a reprint of this article, please contact reprints@law360.com.

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