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Guidance on Coronavirus Business Interruption Loan Scheme

Friday 20 March 2020

The Financial Conduct Authority (FCA) has published new guidance for mortgage lenders and administrators, and small business lenders which supports announcements made by the Chancellor on support for businesses and homeowners impacted by COVID-19.

Mortgages

The new guidance makes clear that lenders should:

  • Grant customers a payment holiday for an initial period of three months, where they may experience payment difficulties as a result of Coronavirus and where they have indicated they wish to receive one
  • Ensure that there is no additional fee or charge (other than additional interest) as a result of the payment holiday

The guidance also sets out the step’s lenders should take to ensure that the payment holiday does not negatively impact a customer’s credit score.

The FCA has also made it clear that, in the current circumstances, it does not consider repossession in the best interests of the customer. As a result, repossession should not begin or continue unless the firm can demonstrate clearly that the customer has agreed it is in their best interest. They will continue to review and update the guidance.

Small business lenders

The FCA has also issued new guidance to firms participating in the Government’s Coronavirus Business Interruption Loan Scheme to support lending to small and medium-sized enterprises of up to £5 million. Loans of up to £25,000 to sole traders and unincorporated enterprises can also fall within the scope of FCA regulation.

The FCA issued guidance on the relevant information for assessing the affordability of such loans. The fact that the customer may, at the time of the application, be temporarily experiencing exceptional financial pressures does not mean that the firm is prevented from making the loan.


The guidance says: 

  • Lenders may consider appropriate evidence, including historic trading figures as well as future forecasts.
  • If forecast income does not materialise, lenders should consider deferring repayments until it does.

Quote mark

We want to help firms support consumers during these unprecedented times. 'Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms. In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time. 'Small businesses can be confident that their access to funds can be based on how their business has performed in the past and its future prospects – not its position today.

Christopher Woolard, Interim Chief Executive, FCA

 

View the guidance