FCA GUIDANCE ON CORONAVIRUS AND CUSTOMERS IN TEMPORARY FINANCIAL DIFFICULTY – FCA SURVEY CALLS

YOUR COMPLIANCE MATTERS – FCA GUIDANCE ON CORONAVIRUS AND CUSTOMERS IN TEMPORARY FINANCIAL DIFFICULTY – FCA SURVEY CALLS

Relevance: All firms.

Action Required: Ensure that you have implemented FCA Guidance, in advance of possible FCA contact to review your actions.

Following our May newsletter, regarding consultation on dealing with customers in temporary financial difficulty, final guidance was published on 14 May 2020, see link https://www.fca.org.uk/publications/finalised-guidance/coronavirus-customers-temporary-financial-difficulty-guidance-insurance-premium-finance

The FCA is now following this up with calls to regulated firms. The 30 minute call is designed for the FCA to understand:

• The actions your firm has taken following publication of the guidance

• How your firm is identifying, contacting, and communicating with customers who may be in financial difficulty

• Information regarding the options that are offered to customers

• Your engagement with premium finance providers

You need to ensure that you understand how the FCA will expect you to respond to customers suffering financial distress, as a result of Coronavirus.

In summary, the guidance confirms the way in which firms should respond to customers displaying signs of financial distress, as a result of coronavirus. This will include:

· Customers getting in touch and raising the issue with you directly.

·Situations where you should be able to identify signs of financial distress (for example missed payments).

In these circumstances, the Regulator expects you to:

·Review the covers that the client has in order to ensure that they meet current needs.

·Cancel any covers which are no longer required, or appropriate.

·Waive cancellation fees.

·Waive mid-term adjustment charges arising.

The Regulator expects you to communicate the process which clients can follow should they be suffering distress, as a result of the pandemic, via your website.

You need to ensure that guidance for customers allows them to contact you by any relevant means (telephone, email, or post) to ensure that vulnerable customers are not disadvantaged.

Guidance on Premium Finance

The guidance applies regardless of whether finance is provided by a regulated credit agreement or through some other means.

The FCA expects payments to be deferred for between 1-3 months unless deferment is clearly not in the client’s interest.

The proposed guidance makes it clear that interest charges can continue to accrue during the payment deferral period. This may make it inappropriate for customers to defer payments – the firm will need to make a judgement on this on a case-by-case basis.

Continuing Client Contact

Clearly, the need for specific insurance covers may change once the lockdown is over. Firms should encourage customers to keep in touch in order to ensure the firm continues to understand the circumstances that apply, the appropriate covers to provide and the need for continued payment deferral.