(Alliance News) - The UK Financial Conduct Authority on Wednesday said it is planning on extending its current ban on home repossessions to April 1 from January 31.
But consumer credit firms may be able to repossess goods and vehicles from January 31.
"This approach takes account of the worsening coronavirus situation and the government's tighter coronavirus-related restrictions which mean that consumers could experience significant harm if forced to move home at this time as a result of repossession proceedings," the regulator said.
It continued: "We recognise that there are also government bans on evictions in some nations, which could also prevent firms from enforcing home repossessions."
The FCA's current credit guidance means that before January 31, 2021 firms should not terminate a agreement or repossess goods or vehicles under the agreement that the customer needs, except in exceptional circumstances.
It is now proposing changing this so that consumer credit firms will be able to repossess goods and vehicles from January 31, 2021.
It added: "However, this should only be as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding. Importantly, firms will also be expected to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate."
The watchdog said this approach reflects the different risks and harms that customers with goods or vehicles on credit are likely to face compared to those who are at risk of losing their home.
The FCA said customers repossessing goods and vehicles under consumer credit agreements may be in the interest of the customer in the long term.
"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 watchdog explained.
The FCA added: "Our 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, as well as following relevant government public health guidelines and regulations when undertaking repossession action."
By Paul McGowan; paulmcgowan@alliancenews.com
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