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Law360, London (January 27, 2021, 12:11 PM GMT) -- Britain's finance watchdog said on Wednesday that it will extend its ban on the repossession of homes until April to help people who have fallen behind on their mortgages amid the chaos of the COVID-19 crisis.
The Financial Conduct Authority also said it will consider increasing the limit on contactless payments for goods and services as the pandemic continues to hurt home-owners and consumers.
The ban on lenders repossessing homes until at least April, except in exceptional circumstances, the City watchdog has confirmed. It did not specify what those circumstances were. However, it said it will allow repossession of consumer goods such as cars to take place from Jan. 31, but told lenders to use this as a last resort.
"Our 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 at this time," the FCA said.
The FCA also said it will consider raising the cap on contactless payments from £45 ($62) to £100 to make payments easier during the pandemic. The regulator said that its decision to increase the cap from £30 to £45 at the beginning of the pandemic led to more people using contactless payments and that it wants to keep pace with consumer needs.
Companies that decide to repossess consumer goods must comply with government public health guidelines and regulations, such as on social distancing and shielding, the regulator warned.
"Importantly, firms will also need to consider the potential wider impact on vulnerable customers, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate," the FCA added.
The ban on repossession of homes or goods under consumer contracts was due to expire at the end of this month, but the FCA has said that it would consider extending some parts of the repossession ban.
The finance regulator said in October that that the estimated number of British consumers who have fallen into financial trouble has risen by two million since the onset of the coronavirus crisis. It urged those households to turn to their lenders for help.
An FCA study in 2020 found that about 12 million people in Britain have so-called low financial resilience, which means they struggle to pay bills or make loan payments. Two million of them have become newly financially vulnerable since February 2020. The regulator based its estimates on a survey of 7,000 people in July.
The watchdog asked banks in April to offer three-month payment breaks to customers who fell ill or lost their jobs during the COVID-19 crisis, and extended the measure until the end of October. The FCA said in November that borrowers struggling to repay credit card debt, motor finance and similar bills because of the health crisis will be given more time to defer payments.
--Additional reporting by Najiyya Budaly and Irene Madongo. Editing by Joe Millis.
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