FCA proposes update to guidance on mortgages and consumer credit repossessionsThe FCA has published draft guidance setting out its proposed approach to repossessions from 31 January 2021.
Its current guidance on mortgage repossessions means firms should not enforce repossessions before 31 January 2021 except in exceptional circumstances, such as a customer requesting that proceedings continue.
The regulator is now proposing extending this guidance so that firms should not enforce repossessions before 1 April 2021.
This FCA said its approach takes account of the worsening coronavirus situation and the government’s tighter coronavirus-related restrictions which mean that consumers could experience significant harm if forced to move home at this time as a result of repossession proceedings. It also recognises that there are government bans on evictions in some nations, which could also prevent firms from enforcing home repossessions.
Its current consumer credit guidance means 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.
The FCA is now proposing changing this so that consumer credit firms will be able to repossess goods and vehicles from 31 January 2021. However, this should only be as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding. Importantly, firms will also be expected to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate.
It argues that its proposed 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.
For customers who remain in payment difficulties under a relevant consumer credit agreement, continuing to restrict repossessions may not be in their interests. The shorter terms and higher interest rates on these agreements, combined with the depreciating value of the goods or vehicles, means that they could end up owing more in the long term if repossessions are prevented.
The FCA believes that its approach, therefore, takes appropriate account of the risks to customers of further asset depreciation, whilst providing appropriate protections by ensuring that firms repossess only as a last resort and also consider the impact of repossession action on those who are vulnerable, as well as following relevant government public health guidelines and regulations when undertaking repossession action.