In a recent announcement, the UK Financial Conduct Authority (FCA) proposed that financial services firms would be able to resume repossessions from 31 January 2021.
The FCA’s current consumer credit guidance means that firms are not able to terminate a regulated agreement or repossess goods or vehicles under the agreement that the customer needs – except in exceptional circumstances – until 31 January.
However, the Association also explained that repossession should only be used “as a last resort” and complying with public health regulations such as social distancing and shielding.
Furthermore, firms are expected to consider the impact on customers who may be vulnerable when deciding whether repossession of goods or vehicles is appropriate.
The restriction on repossessions came into place in November 2020 when the FCA announced additional support for consumer credit borrowers experiencing payment difficulties as a result of the pandemic.
However, as we approach the January deadline, the FCA has suggested the restriction on repossessions may not be in the best interests of customers who remain in payment difficulties under a relevant consumer credit agreement. The shorter terms and higher interest rates on these agreements, combined with the depreciating value of the goods or vehicles, means that they could end up owing more in the long term if repossessions are prevented.
The announcement concluded: “This approach, therefore, takes appropriate account of the risks to customers of further asset depreciation, whilst providing appropriate protections by ensuring that firms repossess only as a last resort and also consider the impact of repossession action on those who are vulnerable.”