The Financial Conduct Authority (the "FCA") has published the next stage of Covid-19 support for consumer credit customers. The Payment Deferral Guidance (the "Guidance") comes into force on 25 November, though the FCA has encouraged firms to consider following this guidance and providing the enhanced support to customers earlier, if they are able to so.

This Guidance is designed to enable firms to continue to deliver short and long-term support to customers affected by the coronavirus pandemic and the Government’s response to it. It is intended to support firms to treat fairly those consumers who are affected, and to help customers bridge the crisis and get back to a more stable financial position.

The Guidance covers personal loans, credit cards, store cards, catalogue credit, rent to own, buy-now-pay-later, pawnbroking, motor finance and high-cost short-term credit, and will continue to provide support for affected consumers until 31 July 2021.

The new Guidance provides that eligible customers affected by Coronavirus should be able to benefit from payment deferrals of up to 6 monthly payments in total, and so:

  • Borrowers who have not yet had a payment deferral can apply for payment deferrals of up to 6 months in total;
  • Those who currently have a payment deferral will be eligible to apply for a further deferral, so long as the total length of deferrals does not exceed the maximum 6 months in total; and
  • Those who have previously had a payment deferral of less than 6 months can also apply for a further payment deferral, as long as the deferrals don’t exceed 6 months in total.

High-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of 1 month.

Consumers will have until 31 March 2021 to apply for an initial or further deferral. If borrowers who have not yet taken a deferral think they need the full 6 months, they should apply in good time before their February 2021 payment (to cover a full 6 months of payments, from February to July inclusive).

The FCA has reiterated that consumers should keep up with payments on their loans or credit products if they can afford to, and should only request payment deferrals where absolutely necessary.

Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “It is in a consumer’s best interest to only take a payment deferral when absolutely necessary. Those that are able to keep paying should do so."

“However, for those continuing to face payment difficulties as a result of coronavirus, these measures will ensure they continue to be able to access much needed support during this crisis. We also want to highlight that tailored support will still be offered and remains the most appropriate option for many borrowers.”

Where a firm assesses that a payment deferral is not in a consumer's interest (or where consumers are not or are no longer eligible for payment deferrals under the Guidance), the firm should instead provide tailored support. That support could include the provision of further payment deferrals, where appropriate. These payment deferrals would not be subject to the Guidance but would be provided as a form of tailored support.

While a payment deferral would not be reported as a missed payment on a consumer’s credit file, lenders may still take this into account when making lending decisions and so this does not mean that consumers’ ability to access credit will be unaffected. However, tailored support may be reported on a consumer’s credit file and lenders should inform consumers when this is the case.