The regulator said that to “ensure we can act quickly to enable firms to help consumers” it would consult on this guidance over the next 10 working days.
The FCA’s current guidance states that if a customer indicates that they are experiencing payment difficulties due to the rising cost of living, firms should offer “prospective forbearance” to help them “avoid, reduce or manage any payment shortfall that would arise”.
It added that this includes customers who have not yet missed a payment.
Types of forbearance measures include concessions on monthly installments, contract variations such as term extensions and temporary switches to interest-only.
The regulator acknowledged that not all firms would be able to offer contract variations.
It reiterated that companies needed to be able to justify why a certain forbearance option was offered and that customers need to be given “adequate information” to understand the implications of any proposed arrangements.
Firms have ‘flexibility’ to apply forbearance measures at scale
The regulator continued firms had “flexibility and scope” to tailor their approach if they needed to help many customers at the same time.
It said firms could use automation or digital tools to ask borrowers to provide information on their circumstances, offer a customer a forebearance option or a range of options.
The FCA said that in the context of the rising of cost of living then a company can offer a group of customers with “similar needs and circumstances a range of options that are appropriate to their circumstances”.
“Firms should have policies, procedures and controls in place to avoid agreeing inappropriate forbearance arrangements with customers who may have more complex needs, including those who may be in more vulnerable circumstances due to physical or mental illness, unemployment or other characteristics of vulnerability,” it added.
The regulator said firms can provide information digitally but the firms should acknowledge that some may find “digital interactions difficult” and adopt a multi-channel approach.
The FCA added that firms can offer contract variations to borrowers wanting to lower monthly payments but did not require forbearance.
It said that a company could vary or replace an existing contract without undertaking an affordability assessment if there is no additional borrowing or changes to its terms that could materially impact affordability.
FCA: ‘We will consider further steps’
This includes interest rate switches, term extensions and variation to interest-only.
The FCA said: “The purpose of this guidance is to ensure firms are clear about the effect of our rules and the range of options they have to support their customers who are facing higher interest rates alongside other cost of living increases.
“We will continue to engage with firms to monitor how they are providing the support borrowers need and the outcomes they receive. We will consider if there are further steps we can take to help firms to support their borrowers, including at scale.”
