This guidance applies to regulated firms who issue credit cards and retail revolving credit products. It also applies to firms that have acquired these debts. It does not apply to business credit cards.
Our Payment Deferral Guidance (PDG) for mortgages and credit has now expired, but our Tailored Support Guidance (TSG) remains in place.
This guidance applies in the exceptional circumstances arising out of the coronavirus pandemic (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 provide, for a temporary period only, exceptional and immediate support to customers 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 customers 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 relate 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.
Customers whose payments have been deferred under this guidance should not have the use of their cards or credit facility suspended except where the firm acts in accordance with its obligations under section 98A of the Consumer Credit Act 1974, for example in the event of fraud.
This guidance comes into force on 14 April.
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 £1 where firms’ systems 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 reasonably 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 unless the firm determines (acting reasonably) that it is obviously not in the customer’s interests to do so.
An example of a situation in which a payment deferral may be appropriate is where there is or will be a temporary reduction in household income that would have otherwise been used to make repayments in relation to customers’ credit card or revolving credit agreement.
In determining whether a 3 month payment deferral is obviously not in customers’ interests, firms should consider both customers’ need for immediate temporary support and the longer-term effects of a payment deferral on customers’ situation, in particular their ability to repay any accrued interest once the payment deferral ends, and over what period. The interest rate will be among the relevant considerations. For example, a payment deferral would obviously not be in customers’ interests if it would give the firms’ customers a greater overall debt burden compared to other solutions (that might involve reduced or waived interest for example) that could equally meet customers’ needs and that burden would be clearly unsustainable.
There is no expectation under this guidance that the firm makes enquiries with each customer to determine the circumstances surrounding a request for a payment deferral, or whether this is not in the customer’s interests. We have disapplied CONC 6.7.18R and 6.7.19R to give effect to this.
Where a 3 month payment deferral is not considered appropriate, firms should, without unreasonable delay, offer other ways to provide temporary relief to the customer in accordance with treating the customer fairly. This could include reduced payments. This could also 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 usual minimum monthly payment due if, for example, the loss of income is partial.
This guidance does not prevent firms from providing more favourable forms of assistance to any customer including a longer payment deferral if deemed appropriate.
Customers should be able to request a payment deferral at any point after the guidance comes into force for a period of 3 months. This means that a payment deferral could go beyond the point where the 3 month window for requesting a payment deferral expires.
Firms should make clear in their communications, including on their 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 deferral period. If the customer is unable to resume payments at the end of the payment deferral 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, or a different solution for a period where a payment deferral has been deemed not in the customer’s interests as a result of circumstances relating to coronavirus, is entitled at the end of the deferral period to forbearance under our existing rules, then as part of this, we expect any interest accrued during the relevant period to be waived.
A firm should give customers adequate information to enable them 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.
A customer should have no liability to pay any charge or fee in connection with the permitting of a payment deferral, or a different solution where a payment deferral has been deemed not in the customer’s interests, under this guidance.
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 Coronavirus Data Reporting Guidance published by the Credit Reference Agencies in consultation with SCOR, firms should not report a worsening arrears status on the customer’s credit file during the payment deferral period. However, where additional forbearance is required, for example in the form of waived interest and charges, we would expect this to be reflected in the usual manner.
Where customers have been unable to reach timely agreement with firms for a payment deferral because of firms’ operational difficulties and subsequently miss a payment which is reported to their credit file, or where they have entered into a similar temporary payment deferral arrangement with their lender as a result of the coronavirus situation which has resulted in a worsening arrears status being reported, we would expect firms to work with customers and Credit Reference Agencies to ensure that any necessary rectifications are made to credit files to ensure no worsening arrears status is recorded during the payment deferral period. Firms should also ensure no default or arrears charges are levied in relation to payments missed in these circumstances.
Where firms use indulgences or waivers to give customers a payment deferral under this guidance, we expect such firms to also give these customers indulgences or waivers to relieve the customers from any potentially adverse consequences arising under the contract from non-payment during the payment deferral (for example in relation to fees and charges and 0% interest deals).
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. We have amended CONC 6.7.5R to address this.
We have also suspended the ‘persistent debt’ remedies provisions in CONC 6.7.27R to 6.7.40G in respect of customers who have been granted a payment deferral. 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 should 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 coronavirus in order to ensure that they do not pose unjustifiable burdens on these customers who may be experiencing temporary payment difficulties.
Process and next steps
The measures in this guidance should be brought into effect no later than 14 April. Firms are free, however, to implement these measures sooner, at any time from 9 April, if they wish and we would welcome firms doing so. To facilitate this, the changes to the CONC rules come into effect on 9 April.
If you have any questions or concerns about this guidance, contact us.
The FCA’s objectives and regulatory principles
The proposals in this guidance 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.
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 this guidance will adversely affect consumers with protected characteristics.