Question to the HM Treasury:

To ask the Chancellor of the Exchequer, pursuant to the Answer of 25 March 2020 to Question 31557, what steps his Department has taken to protect consumers' credit ratings being affected by the financial effects of the covid-19 outbreak.

Earlier this year, the Financial Conduct Authority (FCA) published guidance on what it expects mortgage and consumer credit lenders to do for customers facing temporary cashflow disruptions as a result of COVID-19. The guidance states that firms should exercise forbearance by offering the customer a payment deferral period (payment holiday) meaning the customer makes either no, or small, token payments during that period.

The guidance sets out that there should be no worsening of arrears status on a consumer’s credit file from taking out a payment holiday. This was reconfirmed in the FCA’s updated guidance and continues to be the case for any borrower taking out a payment holiday until 31 October.

It is important that lenders act responsibly when deciding whether or not to accept a credit application, to ensure that consumers are not lent to in an unaffordable way. Therefore, outside of payment holidays, the FCA expects firms to reflect repayments and arrears on the consumer’s credit file in the usual manner.