08Apr

The Financial Ombudsman Service has instructed credit providers to treat borrowers sympathetically if they have financial difficulties as a result of the coronavirus outbreak. The FOS guidance includes specific instructions for firms such as second charge mortgage lenders and motor finance firms.

The Government has announced what seems like very generous support for some workers likely to be badly affected, such as those in the leisure sector; and the self-employed.

However, some of these support packages will take several months to be delivered, and there will still undoubtedly be many who are adversely affected financially who don’t qualify for any extra state support over and above the usual benefits system.

As there will undoubtedly be many borrowers struggling to make credit repayments, FOS calls on lenders and other providers to consider whether it is appropriate to offer additional forbearance measures, such as payment holidays and pausing on repossessions and court actions. FOS would normally expect firms to consider forbearance measures such as repayment plans, freezing interest and charges, reasonable arrears rescheduling and debt write-off where appropriate.

In the motor finance sector, firms are asked to fully inform consumers of their options to exit the agreement and any impact these may have on their credit file.

There are also a larger number of specific instructions from FOS to lenders of second charge mortgages (secured loans):

  • Lenders should actively consider granting longer payment holidays
  • Any payment holiday that is granted should not be evident on the customer’s credit report
  • Lenders should offer a payment holiday where the firm judges this is appropriate, even if the customer doesn’t ask for one
  • Firms should carefully listen to their customers and proactively look for signs of financial difficulties
  • Lenders should provide additional ways customers can make contact, wherever possible

These instructions are likely to be applied by FOS adjudicators and ombudsmen for many months and years into the future, as there is no reason why a customer can’t submit a complaint in, say, three years’ time, alleging financial difficulties exacerbated by their credit provider’s failure to treat them fairly when they were struggling financially during the Covid episode. Furthermore, we can’t say how long the virus will be around – while everyone hopes it will peak soon, there may be spikes in infection rates at later times.

FCA rules remain unchanged in that firms are expected to conclude their investigations into customer complaints within eight weeks of receipt, wherever possible. Where this is not possible, the firm must advise the customer of the reasons for the delay and advise the customer of their right to go to FOS. Any firm who cannot meet the eight-week deadline because of coronavirus-related issues must advise the FCA without delay, so a firm cannot simply write to customers and say “we were unable to complete our investigations within eight weeks due to coronavirus issues” – the regulator must also be informed.

Finally, with many FOS staff working from home, their technical advice desks are operating reduced opening hours.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article