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When Rishi Sunak bounced the banks into mass payment deferral programmes, he also indicated that this would not impact a consumer’s credit score.  By the time Gov.uk set out their views in May on help with mortgages they stated that “payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files.”  To a consumer that means a free lunch with no comeback.

However, the FCA position since late May is that whilst credit files may be clear, lenders may use other sources to assess creditworthiness.  Therefore, assessment of changes to income, expenditure, indebtedness or types of debt are permissible factors to meet the regulator’s responsible lending requirements.

So despite initial government rhetoric that payment deferral would not impact individuals, we are seeing this have deeper ramifications.  Most lenders are now looking wider than the score to assess future affordability and taking in other aspects including furlough, use of BB Loans, unsecured deferral and others.  We continue to challenge this with the FCA, but it is important that advisers check credit files where customers have deferred payment on either mortgage, loans or taken other credit.  This is going to be a difficult conversation, but customers should only be using these benefits in cases of genuine need.

Lenders offered the option to defer and we now see borrowers who have taken support be viewed differently. It was and is a choice on both sides. But we risk consumers not looking at our industry kindly.  This will be a consumer issue with government, who may have to intervene to tell the regulators to change their guidance.

Robert Sinclair, AMI
July 2020

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