FCA proposes extending mortgage repossessions suspension 

The update sets out the approach to repossessions and mortgages that would take effect from 31 January – existing guidance says firms should not enforce repossessions before that date except in exceptional circumstances. The draft guidance proposes extending this until 1 April 2021.

How the repossessions moratorium will work:

• Lenders will not issue a warrant for eviction or enforce an existing warrant before 1 April;
• Lenders can commence court action, including obtaining a possession order from the courts but will not seek a warrant to enforce the possession while the Moratorium is in place;
• Lenders will aim to engage or re-engage customers who were already in proceedings prior to March 2020 or who are not in contact with the lender and have not been paying their mortgage for some time, via letters or phone calls;
• Lenders are able to issue a formal demand, so that the customer is aware of the money they owe and informed that the case will go to possession proceedings;
• Lenders will seek to resolve the case through alternative means, including informing the customer about voluntary means and rehousing options;
• Firms can proceed with repossession in exceptional circumstances, including for empty properties or where the customer wants the possession to go ahead. For buy-to-let customers, lenders may use a Receiver of Rent where appropriate which would allow the tenant to remain in the property if they are maintaining rental payments.

The consumer credit guidance currently in place means that before 31 January 2021 firms should not terminate a regulated agreement or repossess goods under the agreement that the customer needs. The FCA now proposes to change this so that consumer credit firms will be able to repossess goods and vehicles from 31 January 2021, but only as a last resort.

The regulator has highlighted that it expects firms to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate.

However the FCA also stated: “For customers who remain in payment difficulties under a relevant consumer credit agreement, continuing to restrict repossessions may not be in their interests.

“The shorter terms and higher interest rates on these agreements, combined with the depreciating value of the goods or vehicles, means that they could end up owing more in the long term if repossessions are prevented. Our approach takes appropriate account of the risks to customers of further asset depreciation, whilst providing appropriate protections by ensuring that firms repossess only as a last resort.”

Last year, the FCA issued guidance on tailoring forbearance for customers still struggling to make payments after deferrals. Credit Strategy’s first broadcast of the year will be a masterclass on how creditors can personalise collection strategies.