Summary of Response

Throughout the Covid-19 crisis, the UK's banking and finance sector, in partnership with the government and regulators, has worked hard to support people's financial wellbeing. A range of measures have been developed to help customers whose finances have been impacted by the pandemic and provide them with vital breathing space. These have included granting nearly two million mortgage payment deferrals, more than one million payment deferrals on credit cards, over 700,000 payment deferrals on personal loans and over 26 million overdraft buffers applied to primary current accounts.

The industry's message to customers throughout the pandemic has been that it will always be better for a customer who can afford to continue to make payments towards their mortgages or other borrowings to do so, but support is available if they cannot. Recent figures^[1] we have published indicate that most customers who requested a mortgage payment deferral have now resumed making repayments on their mortgage. We recognise that significant uncertainty remains over the number of borrowers who will require further assistance when their current, or subsequent, mortgage payment deferral comes to an end.

We would like to thank the FCA for the high level of on-going engagement and dialogue held since the CFI was issued, and note that many of the ideas and suggestions we proposed have been incorporated in the draft guidance.

As stated in our original response to the FCA's Call for Input (CFI), we believe that aligning the  industry's return to normal forbearance and Credit Reference Agency (CRA) reporting with the ending of the government's job retention scheme (JRS) at the end of October is the right thing to do.

We, and our members, welcome the additional guidance being proposed and note that it supplements the earlier guidance ?Mortgages and coronavirus: Updated guidance for firms? ('the June Guidance?).

We note the flexibility included in the draft guidance in relation to issues such as local lockdowns; recognising that inexperienced staff may be dealing with forbearance related issues and; the ability to make use of digital and/or automated options to gather and assess customer data. 

In relation to second charge mortgages, we have not responded in detail, but  we do not support the differentiated treatment of customers exiting a payment deferral. We are concerned that customers would have sought a payment deferral without realising it would result in a payment shortfall and do not think this is in the spirit of Principles 6 and 7. We agree with the Finance and Leasing Association's (FLA) call to treat second charge mortgages in the same way as first charge mortgages.

In relation to Buy-to-Let (BTL) borrowers, our members have expressed a desire to return to a BAU approach for forbearance, including for customers requiring further short-term help.

In relation to repossessions, we request that any additional guidance works in conjunction with the revised Ministry of Justice/HM Courts and Tribunal Service Covid-19 processes relating to possession. In turn, this will help set expectations on the management and prioritisation of possessions once the Moratorium expires. While we understand the sentiment to provide certainty that customers will not face eviction should they be impacted by the pandemic, para 7.3 sets requirements that would be extremely complex for lenders to evidence.

The PRA released a statement^[2]  on Wednesday 26 August which provides guidance on Covid-19 IFRS9 and capital requirements as Covid-19 specific payment deferrals come to an end. We have not identified any conflict between the PRA's guidance and the FCA's proposals.

To ensure firms have sufficient time to implement and operationalise the changes, we request that the finalised guidance is issued as soon as possible.

Firms will require time to implement the finalised guidance whilst simultaneously preparing to implement the new Breathing Space Regulations and Interest Only changes (CP20/13). We request that the FCA reviews the forward-looking regulatory change roadmap, to identify discrete pieces of work that could be de-prioritised. This would provide firms with the additional capacity they require to implement the initiatives highlighted, in turn reducing the impact of regulatory change.