OVERVIEW
MORTGAGE ‘PAYMENT HOLIDAYS’
The Financial Conduct Authority (FCA) has confirmed the support that lending firms should give to mortgage customers who are either coming to the end of a payment holiday or who are yet to request one. The FCA is also reminding customers that if they can afford to resume payments, they should.
For customers still experiencing temporary payment difficulties due to Covid-19, lenders will offer support, with options including a full or part payment holiday, for a further three months. Customers yet to apply for a payment holiday have until 31st October to do so.
The FCA has confirmed:
- Customers that have not yet had a payment holiday and who experience financial difficulty have until 31st October to request one.
- The current ban on lender repossessions of homes will be continued to 31st October. This will ensure that people are able to comply with the Government’s policy to self-isolate if they need to.
- Lenders will communicate with customers regarding what happens when their payment holiday ends. They should offer a range of options for how the missed payments will be repaid, if they are able to resume payments.
- Lenders will continue to support customers who have already had a payment holiday where they need further help. Lenders will contact their customers to find out what they can repay and, for those who remain in temporary financial difficulty, offer further support, which will include the option of a further three-month full or part payment holiday.
- Payment holidays offered under this guidance will not have a negative impact on credit files. However, consumers should remember that lenders may use information obtained from other sources, such as bank account information, in their lending decisions.
Depending on the customer’s circumstances, firms may make them aware of self-help steps a customer may take or signpost customers towards sources of debt advice. This will be for anyone concerned about managing their money during Coronavirus crisis and who wants to find out what steps to take to get back on track.
When implementing this guidance, lending firms will be particularly aware of the needs of their vulnerable customers and consider how they engage with them. For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access alternatives.
This guidance came in to force on 4th June 2020 and only applies to mortgages. It does not apply to consumer credit products which are covered by separate guidance, which will be updated by the FCA in due course and which we will publicise once received.
FINANCIAL CONDUCT AUTHORITY (FCA) SURVEY
The FCA will be asking around 13,000 firms to complete a short survey to help them obtain a more accurate view of firms’ financial resilience as a result of the Coronavirus crisis.
The FCA acknowledges that firms will be concerned about phishing emails and scams at this time. Please check that the e-mail address is from [email protected] or an fca.org.uk e-mail address if/when you receive the survey. If you have any questions you can speak with the FCA Contact Centre on 0800 111 6768. They will use the data provided, alongside existing data, to support their ongoing work.
UPDATE ON BUSINESS INTERRUPTION INSURANCE COURT CASE
As we reported in a previous Bulletin, the Financial Conduct Authority (FCA) is initiating a Court Case to obtain clarity on the provisions of a variety of insurance policies that cover ‘Business Interruption’ (BI) for companies and other organisations. Many companies have complained that when they have tried to make a claim their insurance provider has rejected the claim, citing their policy’s ‘small print’ – hence the FCA-sponsored case to obtain a legal interpretation and judgement.
Contact with insurers and policy documents
The FCA have approached 56 insurers and reviewed over 500 relevant policies from 40 insurers. They have identified a sample of 17 policy wordings that capture the majority of the key issues that could be in dispute.
This initial list of insurers and the policy wordings they use is not exhaustive, so the FCA has published a short consultation on draft guidance asking all insurers to check their policy wordings against those they intend to test to see if theirs will be impacted by the outcome of the case. The FCA expects to publish a list of all the relevant insurers and policies that may have impacted wordings in early July. The consultation on draft guidance also sets out the FCA’s expectations of all firms handling BI claims and any related complaints between now and the Court decision.
The representative sample of policy wordings
From all the policies reviewed by the FCA they have selected a representative sample of 17 policy wordings to give as much clarity as possible to both insurers and policyholders alike. Rather than select firms by market share, they have identified policies that are representative of the key arguable issues and invited insurers to participate on the basis of securing the maximum coverage for relevant policies whilst minimising the number of parties engaged before the Court, in order to make the process as swift as possible for the Court and to obtain the fastest judgement possible.
The insurers who use the representative sample of policy wordings
The following 16 insurers use at least one of the policy wordings in the FCA’s representative sample, which will be examined in the test case:
- Allianz Insurance plc (part of Allianz SE)
- American International Group UK Limited (part of American International Group, Inc.)
- Arch Insurance (UK) Limited (part of Arch Capital Group Limited)
- Argenta Syndicate Management Limited (part of Hannover Re)
- Aspen Insurance UK Limited (part of Aspen Insurance Holdings Limited)
- Aviva Insurance Limited (part of Aviva plc)
- Axa Insurance UK plc (part of AXA SA)
- Chubb European Group SE (part of Chubb Limited)
- Ecclesiastical Insurance Office plc
- Hiscox Insurance Company Limited (part of Hiscox Limited)
- Liberty Mutual Insurance Europe SE (part of Liberty Mutual Group)
- MS Amlin Underwriting Limited (part of MS&AD Insurance Group Holdings, Inc.)
- Protector Insurance UK (part of Protector Forsikring ASA)
- QBE UK Ltd (part of QBE Insurance Group Limited)
- Royal & Sun Alliance Insurance plc (part of RSA Insurance Group plc)
- Zurich Insurance plc (part of Zurich Insurance Group Limited)
The wordings that they use are set out in this list.
Following the process described above, the FCA has asked the following insurers, who underwrite policies in the representative sample, to assist us by participating in the High Court test case:
- Arch Insurance (UK) Limited
- Argenta Syndicate Management Limited
- Ecclesiastical Insurance Office plc
- Hiscox Insurance Company Limited
- MS Amlin Underwriting Limited
- QBE UK Ltd
- Royal & Sun Alliance Insurance plc
- Zurich Insurance plc
These insurers have entered into a framework agreement with the FCA governing the process and timetable for the test case.
How this will affect insurers who are not participating directly in the test case
Given the representative nature of the policies and wordings that have been selected, the FCA expects the test case to provide guidance for the interpretation of many other BI policies that are not in the representative sample.
This means that other insurers will also be affected by the test case and its conclusions. In early July, the FCA expects to publish a comprehensive list of other insurers and many other BI policies in the market that the FCA expects the test case to affect, based on firms’ submissions. Further information can be found on the FCA business interruption webpage.
Next steps
Here are the main next steps and timelines for how we envisage the test case to proceed, although there remain a number of uncertainties including the consent of the Court:
| 9th June | FCA files claim form and particulars |
| Circa 11th June | Case management conference, at which the Court will be invited to fix the timetable for the case |
| 23rd June | Insurers file Defences |
| Circa 26th June | Further case management conference |
| 3rd July | FCA files Reply |
| First half of July | Skeleton arguments and replies served |
| Second half of July | 5-10 day court hearing |
If this timeline is essentially accurate, we could expect a judgement towards the end of August; however, as we all know, Court cases are often delayed so please do not assume that the timeline will definitely be followed. We will update you as the case proceeds.
We will issue further advice and guidance Bulletins as the Covid-19 situation develops.
Sir Henry Boyle
1100 hrs 8th June 2020