Context
The FCA has issued Final Guidance for firms in relation to customers in financial difficulty as a result of Coronavirus. The guidance, which applies to regulated firms operating in the insurance and regulated premium credit sectors, is designed to protect customers by providing them with temporary, and where necessary, longer-term support.
The FCA has also issued a Feedback Statement which outlines its consideration of the responses received from firms, trade bodies and consumer groups and how this feedback has been included in the Final Guidance.
Key points to note
- The guidance came into force on 1st November 2020 and is not intended to have any relevance in circumstances other than those related to coronavirus
- A firm is likely to breach the following rules if the guidance is not followed:
- Principle 6 (A firm must pay due regard to the interests of its customers and treat them fairly)
- Principle 7 (A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading)
- ICOBS 2.5.-1R which requires a firm to act honestly, fairly and professionally in accordance with the best interests of its customers
- CONC 7 – Arrears, default and recovery (including repossessions)
- Firms should act when a customer contacts them because they are having difficulty making repayments.
- Firms should also consider whether it would be necessary or appropriate to contact customers to offer support where a customer has missed a payment during the pandemic, this is a change in approach from the previous guidance which expected that all customers who missed payments should be contacted. Firms should therefore consider what steps they should be taking and take into account where it has been identified that the customer is, or could potentially be, vulnerable.
- Firms should not cancel policies solely because of non-payment without first considering support for customers who may be in financial distress due to the pandemic.
- Where a firm has identified a customer is in financial difficulty due to the pandemic it should consider how the obligations in the above rules can be met.
- Firms should make it clear in their communications that the customer has differing options available and that they are encouraged to get in contact should they face financial difficulty due to the pandemic.
- There is also specific guidance for firms which have entered into regulated credit agreements with customers in respect of their insurance premiums to provide forbearance for those who have either been granted a payment deferral under the FCA guidance issued in August or suffer financial difficulty as a result of the pandemic after 31st October 2020.
- The second part of the guidance, which relates to forbearance, explains that the FCA expects firms to deliver the following outcomes:
- Have due regard to the interests of customers and treat them fairly.
- Treat customers with forbearance and due consideration.
- Not pressure customers into repaying debts within an unreasonably short period of time.
- Protect customers from escalating debt once they have entered into a forbearance arrangement.
- Recognise vulnerability.
- Have clear, effective and appropriate policies and procedures in place for dealing with customers in financial difficulty.
- Allow customers time to consider options and, if necessary, seek debt advice.
- Refer customers for debt advice if appropriate and within the scope of regulatory permissions.
- The Senior Manager responsible for providing support to customers should ensure the policies, procedures and controls are appropriate to meet the needs of any customer requiring or seeking support.
- Firms should ensure that the level of staff resource within the business functions providing support to customers is appropriate.
- Firms should ensure that adequate records of the support offered to customers are retained.