Asked by: Dawn Butler (Labour - Brent Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what discussions he has had with representatives of the Financial Conduct Authority on ensuring that adjudicator rulings are included in consideration for compensation when payday lending companies go into administration.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
Where a high-cost credit firm enters administration, customers with outstanding compensation claims, including those which result from an adjudication by the Financial Ombudsman Service, become unsecured creditors in the administration, and so will be paid after secured creditors and preferential creditors.
Treasury ministers and officials meet regularly with the FCA, and the Government will continue to work closely with the FCA to ensure consumers of financial services are treated fairly.
Asked by: Dawn Butler (Labour - Brent Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what discussions he has had with the Financial Conduct Authority on extending the Financial Services Compensation Scheme to payday lending companies.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Financial Services Compensation Scheme (FSCS) is the compensation scheme of last resort for customers of failed UK-authorised financial services firms and is funded by a levy on the financial services industry. The FSCS is an independent non-governmental body and carries out its compensation function within rules set by the Prudential Regulation Authority and the Financial Conduct Authority (FCA), and they have the power to decide which activities are given FSCS protection. In 2016, the FCA decided not to extend FSCS protection to most consumer credit activities because it believed other regulatory requirements were sufficient.
The FCA’s reasoning for not extending FSCS protection was set out in a letter on 15 February 2019 from its Chief Executive to the Chair of the Treasury Select Committee. This reasoning was that consumer credit firms did not generally hold client assets; losses to consumers had reduced since the FCA had taken over regulation of consumer credit; and, because the cost of providing FSCS cover for high-cost short-term credit would likely need to be subsidised by levies on other regulated firms. A copy of that letter can be found here: https://www.parliament.uk/globalassets/documents/commons-committees/treasury/correspondence/2017-19/fca-chief-executive-to-chair-re-wonga-150219.pdf.
Treasury ministers and officials meet regularly with the FCA, and the Government will continue to work closely with the FCA to ensure consumers of financial services are treated fairly.
Asked by: Dawn Butler (Labour - Brent Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps the Government is taking to support people struggling with mortgage payments as a direct result of the covid-19 pandemic.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
Working with the FCA, the Government introduced mortgage payment deferrals to provide certainty to homeowners who needed it during the initial stage of the Covid-19 pandemic, and approximately 2.75 million mortgage payment deferrals have been provided to UK borrowers, benefiting people across the country with the period of respite this offered.
While the application deadline for mortgage payment deferrals ended on the 31 March, any existing payment deferrals can remain in force until 31 July, or until an individual borrower reaches their six month maximum entitlement. All credit file reporting will return to normal once payment deferrals have ended.
Following the closure of the application period for mortgage payment deferrals, the FCA have set out detailed guidance which stipulates that firms should continue to provide tailored support and forbearance options for borrowers facing new or ongoing financial difficulties. Borrowers struggling with mortgage repayments should reach out to their lender at the earliest opportunity to discuss the options available to them.