The regulator said it would consider three areas – climate risk, economic abuse and debt consolidation – in its work to protect consumers.
It asked stakeholders if regulatory intervention was needed to address climate-related challenges and said it would engage with the government, the industry, and other stakeholders to explore how physical and transition climate risks are affecting lender risk appetite, affordability, and consumer outcomes.
One consideration was the expiry of the Flood Re insurance scheme in 2039, which has supported 660,000 in the decade since it was established to help households with flood coverage. The FCA said many mortgage terms extended beyond 2039, and the expiry of the coverage could influence lender risk appetite.
The regulator said it would engage with the industry, and plan to undertake further structured engagement on this topic early next year.
The FCA will also consider green disclosure as part of its wider commitment to reviewing disclosure, as respondents raised questions about its regulatory remit, especially around green finance.
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Respondents asked the regulator to introduce clearer disclosures regarding retrofit products so people could make better, more informed decisions. However, the FCA said that because this did not relate to financial products, it passed feedback to the government and relevant authorities.
Some respondents asked for more clarity on standards used for affordability assessments where borrowing is used to make efficient improvements or fund climate resilience. The FCA said there was already flexibility in its rules for lenders to use statistical or modelled data in this process, which would support responsible lending.
Help for victim-survivors of economic abuse
Asking how the regulator could better support victim-survivors of economic abuse, respondents said changes were needed to joint and several liability to improve outcomes.
The FCA said a collaborative approach would be needed, and it supported exploring the legal challenges where economic abuse is evidenced, and how processes and procedures could be improved.
It said lenders could apply their own terms and conditions regarding mortgage contract changes, but the FCA said it would be outside of its powers to introduce rules or guidance that allowed equity to be transferred without one party’s consent.
The regulator said firms could refer to the government’s examples of good practice in its Financial Inclusion Strategy in the context of mortgages.
Borrowing to consolidate debt
The FCA asked if a differentiated approach would be preferred in cases where a mortgage was taken to consolidate debt and found that most respondents believed this was “desirable”.
One respondent suggested permissive changes to affordability assessments, and another proposed a requirement to seek legal advice or be given enhanced advice.
There was “cautious support” for revised advice requirements for complex debt restructuring, but some respondents pointed out that not everyone consolidating debt would need enhanced advice.
The FCA is currently undertaking multi-firm reviews around responsible lending, the quality of advice, fees and charges in the second charge mortgage market and will consider those findings for any changes around debt consolidation.
