FCA to extend mortgage repossessions protection to April

Out-Law News | 15 Jan 2021 | 2:49 pm | 2 min. read

The UK's Financial Conduct Authority (FCA) is proposing to extend its current general ban on lenders enforcing repossessions in the mortgage market.

Currently, FCA guidance bars lenders from enforcing mortgage repossessions before 31 January 2021, other than in exceptional circumstances. That guidance was introduced to account for the financial difficulties some borrowers are experiencing as a product of the coronavirus pandemic.

In a new consultation, which closes to feedback at 10am on 18 January, the regulator has proposed to extend the general ban on mortgage repossessions up to 1 April 2021.

However, the FCA is proposing to loosen current restrictions it has imposed in relation to other consumer credit arrangements from 31 January.

At present, firms are generally banned from terminating a regulated consumer credit agreement or from repossessing goods or vehicles under the agreement that the customer needs, except in exceptional circumstances. The FCA has proposed to end that ban from 31 January, setting out new draft guidance instead that would require firms only to terminate or enforce repossession "as a last resort" and in accordance with all relevant government public health guidelines, including on social distancing and shielding, when taking possession.

The FCA has, however, said it expects firms to "exercise particular care" when dealing with vulnerable customers, and when deciding whether repossession of goods or vehicles is appropriate.

"Our 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," the FCA said in a statement.

Andrew Barber, an expert in financial services regulation at Pinsent Masons, the law firm behind Out-Law "The extension of the guidance on mortgages and consumer credit repossessions will help firms deal appropriately with consumers suffering payment difficulties and will enable firms to provide the ongoing support that is required. In light of the fast-approaching deadline, firms must continue to act swiftly and ensure that they are equipped to deal with the changes, particularly those around consumer credit repossessions, appropriately from 31 January."

Rachael Preston, also of Pinsent Masons, said: "The FCA expects firms to engage meaningfully with customers who are struggling to meet their repayment obligations, and to act in accordance with the customer’s best interests. Clearly, firms cannot respond to the change in measures with a 'one-size-fits-all' approach."

"This is important in view of the FCA's different approaches to the different types of agreement" Preston said. "For mortgage customers, the FCA's proposal is taking account of the difficulties consumers would face if compelled to move during lockdown restrictions, because of their home being repossessed. By contrast, the FCA has proposed loosening repossession restrictions for certain other types of credit agreements, given the potential risk of customers facing increasing debt if repossession is further delayed. This is especially relevant when there is a high interest rate and the underlying asset's value is depreciating."