Consumer credit firms can seize vehicles from February
Financial regulator’s draft guidance proposes lenders can repossess goods and vehicles from 31 January 2021
The Financial Conduct Authority (FCA) has proposed ending its current guidance on consumer credit which means that before the end of January 2021 firms should not terminate a regulated agreement or repossess vehicles (or other products) except in exceptional circumstance.
Under the FCA’s draft guidance, consumer credit firms will be able to repossess goods and vehicles from February, but only as a last resort, and subject to complying with relevant government public health guidelines and regulations on social distancing and shielding.
It also expects companies to consider the impact on customers who may be vulnerable, as a result of the pandemic or for other reasons, when deciding whether repossession of goods or vehicles should take place.
It argues that continuing to limit repossessions may not be in the best interest of customers struggling to pay consumer credit agreements. It points out that shorter terms and higher interest rates on these agreements, along with the depreciating value of the goods or vehicles, would mean that consumers could owe more in the long term if repossessions don’t go ahead.
Guidance on mortgage evictions extended to April
Meanwhile, the FCA’s current guidance on mortgage repossessions, which means firms should not enforce repossessions before 31 January 2021 except in exceptional circumstances, has been proposed to be extended until 1 April 2021
The financial regulator cites the worsening coronavirus situation and the government’s tighter coronavirus-related restrictions as the reason why it has introduced the new draft guidance.
It says that consumers could experience significant harm if forced to move home at this time as a result of repossession proceedings. It also highlights the government bans on evictions in some of the devolved nations, which could prevent firms from enforcing home repossessions.
While welcoming the FCA’s proposal to halt mortgage repossessions until April, Peter Tutton, head of policy at StepChange debt charity, highlights concerns about those struggling to pay consumer credit agreement.
“We are concerned about the potential impact of the FCA’s proposal to allow repossession of goods and vehicles in some circumstances after 31 January – customers affected tend to be more vulnerable and some creditors have historically pursued repossession prematurely, which may not square entirely with the FCA urging firms to treat this as a last resort.
He adds: “It’s vital that the FCA not only sets out strong protections, but also monitors the response of creditors and uses its supervision powers to enforce the guidance. For people experiencing debt during the pandemic, the consequences may create real and ongoing hardship even after the public health crisis ends.”
The FCA is inviting comments on the draft guidance by 10am on 18 January 2021.
Does this impact me?
If you're struggling with repayments or think you could end up at risk of repossession, it's best to seek debt management advice.
Everyone's circumstances differ, so you can talk through options available specifically to you with a qualified professional. Debt charity StepChange offer impartial, free advice - or call their helpline on 0800 138 1111.
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