This guidance applies to regulated firms who issue these products to consumers. It also applies to firms that have acquired credit cards and retail revolving credit debts. It does not apply to business credit cards.
This guidance applies in the exceptional circumstances arising out of coronavirus (Covid-19) and its impact on the financial situation of customers of credit card firms and retail revolving credit providers (such as store card issuers and catalogue lenders). It is not intended to have any relevance in circumstances other than those related to coronavirus.
This guidance sets out our expectation that firms should provide, for a temporary period only, exceptional and immediate support to consumers facing payment difficulties due to circumstances arising out of coronavirus. It is intended to provide help to those who might be having temporary difficulty in making their credit card or revolving credit payments due to a loss of or reduction in their income (or income of other members of their household) or to those who expect to experience such difficulties.
This guidance applies where consumers are already experiencing or reasonably expect to experience temporary payment difficulties as a result of coronavirus. Where a customer was in pre-existing financial difficulty, our existing forbearance rules and guidance in CONC would continue to apply. These would include for example the firm considering suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments for a reasonable period of time.
We will review this guidance in the next 3 months in the light of developments regarding coronavirus and may revise the guidance if appropriate.
The guidance builds on Principle 6 (‘A firm must pay due regard to the interests of its customers and treat them fairly’) and on the rules and guidance in CONC 6 of our Handbook that relates to the treatment of customers in actual or possible payment difficulties. It sets out the FCA’s expectations for firms to provide additional coronavirus related support for customers who are experiencing or reasonably expect to experience temporary payment difficulties at the current time. When implementing this guidance, firms should take account of the particular needs of their vulnerable customers.
The guidance is potentially relevant to enforcement cases and the FCA may take it into account when considering whether it could reasonably have been understood or predicted at the time that the conduct in question fell below the standards required by Principle 6.
Consumers whose payment have been deferred under this guidance should not have the use of their cards or credit facility suspended. This should only occur in exceptional circumstances, such as in the event of fraud.
Payment deferrals
In this guidance, ‘payment deferral’ means an arrangement under which a firm permits the customer to make no payments (or a token payment not exceeding a £1 where firms’ system will not allow a zero payment) under their credit card or revolving credit agreement for a specified period without being considered to be in arrears.
Where a customer is already experiencing or expects to experience temporary payment difficulties as a result of circumstances relating to coronavirus, and wishes to receive a payment deferral, a firm should grant the customer a payment deferral for 3 months. An example of a situation in which a payment deferral may be appropriate is where there is or will be a reduction in household income that would have otherwise been used to make their credit payments.
Firms can choose to make the enquiries they consider necessary in order to judge if a payment deferral serves the customer’s interests but there is no expectation under this guidance that the firm investigates the circumstances surrounding a request for a payment deferral.
Firms should make clear in their communications, including websites that payment deferrals are available as set out in the circumstances described above. In addition, if during an interaction between the firm and the customer, the customer provides information suggesting that the customer may be experiencing or could reasonably expect to experience temporary payment difficulties as a result of circumstances relating to coronavirus, the firm should ask whether the customer wishes it to consider granting a payment deferral.
Firms are not prevented from continuing to charge interest during the 3 month period. If the consumer is unable to resume payments at the end of this period because of payment difficulties at that time, they should contact the firm. The firm should work with the customer to resolve these difficulties in advance of payments being missed. Where a customer, who received a payment deferral as a result of circumstances relating to coronavirus, is entitled to forbearance under our existing rules, then as part of this, we expect any interest accrued during the 3 month period to be waived.
A firm may decide to put in place an option other than a 3 month payment deferral, if it is appropriate to do so in the individual circumstances of the case and the firm reasonably considers it needs to do this to treat the customer fairly. This could include a payment deferral of fewer than 3 months if, for example, the expected loss of income is for a shorter period, or accepting a sum below the normal minimum payment if, for example, the loss of income is partial. This guidance does not prevent firms from providing more favourable forms of assistance to the customer including a longer payment deferral if deemed appropriate.
A firm should give customers adequate information to understand the implications of a payment deferral, including the consequences of interest that is accrued during this period and its effect on the balance due under the agreement and on future payments. Firms should also consider safeguards to help customers at the end of the payment deferral in the event of a sudden increase in their minimum payments.
Firms should ensure that there is no negative impact on the customer’s credit file because of the payment deferral. The payment deferrals described here should be regarded as being offered in exceptional circumstances outside of the customer’s control. In accordance with the relevant Steering Committee on Reciprocity (SCOR) Guidance, the account of the customer should not be recorded as having any form of detrimental arrears.
A customer should have no liability to pay any charge or fee in connection with the permitting of a payment deferral under this guidance.
To facilitate a payment deferral, our rules in CONC 6.7.5R (which require a firm to set a minimum repayment amount equal to at least the interest, fees and charges that have been applied to the account, plus one percentage of the amount outstanding) will not apply if the firm decides to vary its contracts in order to follow this guidance. The FCA is amending CONC 6.7.5R to address this[2].
We also intend to suspend the ‘persistent debt’ remedies provisions[2] in CONC 6.7.27R to 6.7.40G for certain customers. These provisions relate to a situation where a customer is over time paying more in interest, fees and charges than they are paying off their balance and requires firms to engage with the customer at specified intervals. The suspension will apply in respect of a customer, who the firm has allowed to defer repayments for the duration set out in this guidance, for the period of the deferment. The provisions will again start to apply in respect of these customers after this period.
Expectations in relation to credit card rates
This guidance builds on Principle 6 (‘A firm must pay due regard to the interests of its customers and treat them fairly’).
It applies to the prices firms set for credit cards. Firms charge different rates of interest for credit cards. Some rates can be particularly high in respect of cards that are usually marketed or offered to low income customers or those with poor credit ratings.
Firms must review their prices to consider whether they are consistent with the obligation to treat customers fairly in the light of the exceptional circumstances arising out of Covid-19 in order to ensure that they do not pose unjustifiable burdens on these consumers who may be experiencing payment difficulties.
Process and next steps
We want to act quickly to protect consumers in these difficult times. We consider that the delay involved in publishing a formal consultation accompanied by a cost benefit analysis would be prejudicial to the interests of consumers. We are therefore not doing so. There is no statutory requirement to prepare a cost benefit analysis in relation to guidance.
This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.
Timing
If confirmed, the measures would start to come into force by Thursday 9 April 2020.
The FCA’s objectives and regulatory principles
The proposals in this consultation support our consumer protection objective and are designed to protect consumers by providing them with temporary support in the light of the current exceptional circumstances arising out of coronavirus (Covid-19).
Equality and Diversity
We are required under the Equality Act 2010 to ‘have due regard’ to the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by or under the Act, advance equality of opportunity between persons who share a relevant protected characteristic and those who do not, and to foster good relations between people who share a protected characteristic and those who do not.
As part of this, we ensure the equality and diversity implications of any new policy proposals are considered. We do not consider they will adversely affect consumers with protected characteristics.