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24th March 2020
FCA sets out new guidance for mortgage providers and for lenders taking part in the Coronavirus Business Interruption Loan Scheme(CBIL))
The Financial Conduct Authority(FCA) has published new guidance for mortgage lenders and administrators, and small business lenders. This supports the announcements made by the Chancellor earlier.
Interim Chief Executive, Christopher Woolard, comments "We want to help firms support consumers during these unprecedented times.
Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms. In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.
Small businesses can be confident that their access to funds can be based on how their business has performed in the past and its future prospects – not its position today."
The new guidance makes clear that firms should:
-Grant customers a payment holiday for an initial period of 3 months, where they may experience payment difficulties as a result of coronavirus (Covid-19) and where they have indicated they wish to receive one.
-Ensure that there is no additional fee or charge (other than additional interest) as a result of the payment holiday.
The guidance also sets out the steps firms should take to ensure that the payment holiday does not have a negative impact on the customer’s credit score.
The FCA has also made it clear that in the current circumstances, it does not consider that repossession will be in the best interests of the customer. As a result, repossession should not be commenced or continued with unless the firm can demonstrate clearly that the customer has agreed it is in their best interest.
The FCA will continue to review these measures as the situation develops and update the guidance appropriately.
Small business lenders
The FCA has issued new guidance to firms participating in the Government’s Coronavirus Business Interruption Loan Scheme.
The Scheme, announced by the Chancellor last Tuesday, supports lending to small and medium-sized enterprises (SMEs) impacted by coronavirus of up to £5m. However, loans of up to £25,000 to sole traders and unincorporated enterprises can fall within the scope of FCA regulation.
The FCA has issued guidance on the information and circumstances that are relevant when assessing the affordability of such loans. The fact that the customer may, at the time of the application, be temporarily experiencing exceptional financial pressures does not mean that the firm is prevented from making the loan.
The guidance says that:
-Lenders may take into account appropriate evidence, including historic trading figures as well as future forecasts.
-If forecast income does not materialise, lenders should consider deferring repayments until it does.