Tue, 13 Oct 2020
On 31 October 2020, the ban on repossession proceedings comes to an end. Approximately 1.8 million people have taken a deferral on a mortgage, and the second period of deferral is now coming to an end. Lenders may commence or continue with possession proceedings if appropriate.
When is it appropriate?
The Financial Conduct Authority (“FCA”) published further guidance on Mortgages and Coronavirus[1] which applies from 16 September 2020. It sets out that firms must continue to act according to the Principles and the Mortgage Code of Business 13 (“MCOB”) imposed on them. Some notable guidance included:
- A firm must pay due regard to the interests of its customers and treat them fairly.
- A firm must pay due regard to the information needs of its customers and communicate information to them in a way which is clear, fair and not misleading.
- A firm must act honestly, fairly and professionally in accordance with the best interests of its customer.
- A firm is responsible for ensuring that all customers get fair and appropriate outcomes and firms should have appropriate systems and controls to ensure compliance with the guidance.
- A firm should not penalise a customer if they have experienced operational difficulties, resulting in a customer subsequently missing a payment. A firm should work with the customer to put them in the position they would have been in, had they received timely forbearance.
- A firm should work with customers and Credit Reference Agencies to ensure that any necessary rectifications are made to credit files, if they have erred, so that no worsening status is recorded in respect of a relevant period.
- A firm should consider wider indebtedness before entering into suitable repayment arrangements.
It is suggested that third party charge holders also use forbearance options and take into account factors such as wider indebtedness. Reference is also made to unregulated agreements secured on land, or where there has been assignment of rights, considering where the guidance could be relevant to them. Further, firms must still comply with general consumer protection law, including, but not limited to the Unfair Trading Regulations 2008.
The guidance, whilst not prescriptive, does require firms to make adjustments for how they treat their customers and it suggests actions such as, extending the term; type of mortgage; deferment of payments. For example, areas where there are further lockdown restrictions, customers should have a plan agreed suited to their specific needs.
It is essential that whatever is agreed, must be clearly communicated, and staff appropriately trained to deal with enquiries. The MCOB 13[2] should be consulted for more detailed guidance in addition to the recent guidance Mortgages and Coronavirus issued on 14 September 2020. The new guidance follows on from previous guidance, published on 20 March 2020, updated on 4 June and 16 June 2020. The FCA is yet to announce if the initial guidance will become redundant.
When do courts start to deal with possession proceedings?
Courts have commenced dealing with possession proceedings, albeit capacity is still very limited. The courts will have a backlog of cases to deal with, in addition to perhaps an influx of new cases due to Covid -19. The Working Group on Possession Proceedings has now published a document entitled Overall Arrangements for Possession Proceedings in England and Wales[3] and it considers how the backlog of cases should be dealt with by the courts. A stay on proceedings for, and to enforce possession, ceases to have effect on 30 October 2020. However, Practice Direction 55C[4] is still in force in relation to the process to be followed where a matter has been stayed.
As any firm who has commenced possession proceedings will know, matters are not concluded swiftly at the best of times, and therefore lengthy delays in the current climate are inevitable. Compromise on cases, where possible, is encouraged to avoid litigation.
The views expressed in this article are the authors own and should not be considered to constitute legal advice.
Gurprit Mattu
14 October 2020
[1] https://www.fca.org.uk/publication/finalised-guidance/mortgages-coronavirus-additional-guidance-for-firms.pdf
[2] https://www.handbook.fca.org.uk/handbook/MCOB/13/?view=chapter
[3] https://www.judiciary.uk/wp-content/uploads/2020/09/Possession-Proceedings-Overall-Arrangements-Version-1.0-17.09.20.pdf
[4] https://www.justice.gov.uk/courts/procedure-rules/civil
