Appearance before the Standing Committee on Finance (July 7, 2020): Summary of international measures in response to COVID-19

Background

The OECD Task Force on Financial Consumer Protection is coordinating a report on measures implemented by various governments and financial institutions in response to COVID-19. This coordination is generating data on risks to consumers, fraud concerns, financial relief on credit and banking products, and impacts to supervisory activities on regulated entities. FCAC is providing a summary of key measures using data compiled by the OECD from June 19, 2020.

Summary of OECD survey results

Survey respondents (62 countries and 86 total organizations) have participated in the Questionnaire between April-June 2020 with the purpose of providing a holistic view of the global response to COVID-19. Governments, financial regulators, and the financial industry all have a role to play in responding to the crisis. The data shows these actors are often working together. For detailed actions from selected jurisdictions, please reference the annex section below.

1) Communicating with consumers

• 81% of respondents have provided information or communications to help consumers manage their finances as a result of the COVID-19 outbreak.
• 47% of respondents have reported issuing warnings regarding scams related to COVID-19 such as stealing personal information and fraudsters posing as banks or governments.

2) Mortgage deferrals and repayments

• 26% of respondents identified deferrals of mortgage repayments, while 23% of respondents identified changes to repayment terms as a relief measure.

3) Measures for other credit products

• 25% of respondents identified deferrals of loan repayments and changes to repayment terms as a relief measure for credit cards and other consumer credit.
• 17% of respondents identified suspension or deferrals of debt collection activities for credit cards, compared to 13% for other consumer credit.

4) Measures for banking and payment services

• Many jurisdictions are taking steps to ensure continued access to banking services. Respondents are encouraging the use of contactless or remote payments and providing additional information to bank customers about accessing banking and payment services. 
• 72% of respondents identified measures for banking and payment services apply to all consumers, not just those who face financial difficulty as a result of COVID-19.  

Annex

Communicating with consumers

Australia

• The Australian Securities and Investments Commission (ASIC) is reporting a spike in email and text scams. There is a significant variety of phishing-related emails and malware that are COVID-19 themed, and a variety of approaches and methodologies are being used by the scammer. These might include “safe” investment opportunities, phishing attempts, and cold-calling members of superannuation funds to collect personal information.
• ASIC is providing updated messaging through its dedicated webpage and social media channels, responding to emerging scams. ASIC is also sharing alerts from the Australian Competition and Consumer Commission (ACCC).

Ireland

• Social and online media monitoring by the Bank of Ireland has indicated an increase in scam text messages and emails purporting to be from a credit institution in relation to online services and/or visa cards being blocked. Online resources are being regularly updated to warn consumers about scams related to COVID-19.

The Netherlands

• The Netherlands Authority for the Financial Markets (AFM) has warned about the increased possibility of scams and fraud and give information to consumers and institutions what to do if they suspect fraud/scams. In these communications, consumers and financial institutions are being warned about possible risks and regulators are closely monitoring the situation.

United Kingdom

• The Financial Conduct Authority (FCA) has web pages available for consumers about the impact of COVID-19 on their finances. This includes dedicated information on mortgages, loans and credit, insurance, and spotting scams. Consumers are also directed towards organizations who may be able to offer assistance, such as the Money and Pensions Service and Financial Ombudsman Service.
• FCA has published a web page and engaged consumers through social media with information for consumers on the common types of scams and tactics that have been identified in the past and may be used during COVID-19. FCA has worked together with the UK National Economic Crime Centre (NECC) and the Pensions Regulator and the Money and Pensions Service urging consumers to be cautious.

United States

• The Federal Reserve established a website for the consumers dedicated to COVID-19 resources, including all of the Federal Reserve’s related press releases, speeches, rules, program information, policy statements, and guidance, as well as warnings about fraud and scams. The U.S. Consumer Financial Protection Bureau (CFPB) has also set up a COVID-19 resources page that outlines different resources and U.S. agencies to help consumers make informed decisions.
• The Federal Reserve has policy statements regarding supervision, loan modifications, mortgage servicing, real estate appraisals, flood insurance, mortgage data reporting, and small dollar lending.

Mortgage deferrals and repayments

Australia

• ASIC has indicated that measures include deferral of loan repayments, changes to repayment terms for mortgages, and enhanced disclosure to borrowers.
• Regulators and government are continuing to monitor key indicates, such as hardship requests granted/refused, reports from the financial industry, and consumer advocates about experiences with lenders.

Ireland

• As of June 2020, over 45,000 mortgage payment breaks have been granted, or are in the process of being granted, in Ireland.
• The Central Bank expects firms to take a consumer-focused approach and to act in their customers’ best interests when implementing mortgage payment breaks. The Central Bank has made clear that firms must provide consumers with the information necessary to understand the payment break and the impact it has on an existing mortgage, including on future repayments and cost of credit.
• For borrowers who have a mortgage approval but who have lost income due to COVID-19, a lender can keep this application open on its system for a period of time after which it can be reviewed and the customer can provide an update on his/her employment and income situation.

The Netherlands

• Several mortgage credit providers have announced that they will offer mortgage payment holidays to their customers as a last resort, should their actual or future financial situation deteriorate because of the  COVID-19 crisis. Generally, mortgage lenders have announced they are willing to help consumers with mortgage payment difficulties, using different approaches.
• It is unclear if consumers will be charged extra for some measures such as payment holidays, and The AFM monitors this closely. The Ministry of Finance has announced that it will facilitate such payment holidays and has published a decision to ensure that deferral of mortgage principal payments minimizes adverse effects.

United Kingdom

• The Financial Conduct Authority (FCA) published new guidance to the industry that borrowers be able to benefit from a 3-month payment holiday where they need one.
• FCA has written to some firms to reiterate that customers on variable rate mortgages taken out before the financial crisis with higher risks characteristics must be treated fairly, and that lenders should be actively reviewing their rates.

United States

• Under the CARES Act, a borrower with a federally-backed mortgage loan may receive a payment forbearance of up to 360 days after confirming financial hardship during the COVID–19 emergency. The mortgage servicer must provide the forbearance with no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full.

Measures for other credit products

Australia

• Some credit card providers are being proactive and refunding late fees and interest where consumers fail to make their minimum repayment. Other lenders are refunding or waiving fees when consumers indicate hardship from COVID-19 related circumstances.
• Responsible lending obligations continue to apply to consumer credit cards and loans by providing important protections to consumers. ASIC has noted that some lenders are evaluating lending processes to provide added flexibility to consumers, including:
  • What changes can be made to a credit contract to reduce repayment pressure without requiring a further responsible lending assessment (eg switching to interest only repayments for a period of time).
  • The likelihood of consumers receiving government stimulus payments (level, duration etc).
  • The likelihood of consumers being re-employed once the effects of COVID-19 subside.
  • Whether verification steps can be reduced in the current environment (thereby reducing pressure on lender’s internal resources) while still meeting their obligations.

Ireland

• The Central Bank of Ireland has indicated that measures for credit products include deferral of loan repayments and changes to repayment terms.
• There is ongoing engagement with industry to ensure the appropriate supports and protections are in place for consumers facing financial difficulties as a result of  COVID-19.

The Netherlands

• In addition to measures for mortgage credit, credit providers have also announced their willingness to accept payment holidays for other consumer credit products without extra costs. The duration of a loan is extended with, and credit providers do not charge anything extra for the payment holiday.
• Several credit providers have decreased the interests on arranged overdraft borrowing.
• AFM is also encouraging financial institutions to treat vulnerable customers fairly; especially when they have payment difficulties because of  COVID-19. Financial institutions have a crucial role in defining the help that is needed to resolve the payment difficulties. The AFM finds it of the utmost importance that over indebtedness, also in these circumstances, should be prevented.

United Kingdom

• An initial package of targeted temporary measures was designed to help consumers with credit products such as credit cards, revolving credit, personal loans, mortgages, and overdrafts. Some measures include loan deferrals, changes to repayment terms, and waiving fees or charges.

United States

• Under the CARES Act, the Department of Education will automatically suspend all payments for most federal student loans through September 30, 2020. Loans will not accrue any interest during this period. The Act also suspends involuntary collection activities on loans in default, such as wage garnishment, reduction of tax refunds, and reduction of other federal benefits

Measures for banking and payment services

Australia

• ASIC has indicated that measures include deferral of loan repayments, changes to repayment terms for mortgages, and enhanced disclosure to borrowers.
• Some providers are allowing consumers to access to their fund in term deposit accounts without charging the usual fees.
• The Australian Government is also facilitating income support payments for eligible households
• Some industries and businesses are only accepting contactless payment and will not accept cash during this time.

Ireland

• The Central Bank of Ireland worked closely with both Government departments and industry bodies to ensure the development of effective measures, clear communication for consumers and implementation of strategies.
• The contactless payment limit for point of sale card transactions has been increased from €30 to €50, effective from 1 April. The availability of this feature has been widely communicated through media and government websites and its use encouraged, where possible.

The Netherlands

• AFM is reporting on steps to ensure continued access to banking services (eg branches, internet, mobile), such as providing added disclosure to bank customers
• Dutch banks are enabling customers to make more contactless payments in stores without having to enter their PIN. For small contactless payments of up to 25 euros, customers hardly have to touch the terminal at all. Banks will continue this initiative for as long as needed as part of the exceptional measures required to contain the new coronavirus. The cumulative limit for contactless payments with a debit card, which used to be 50 euros, is now being raised to 100 euros.

United Kingdom

• Some firms in the UK are proactively allowing customers access to restricted savings products by waiving fees or allowing terms deposits to end early. FCA clarified that firms should consider the circumstances of each customer and the impact giving access to such savings products would have.
• FCA has been urging customers to use alternatives to branches, such as online channels, wherever possible. Firms are encouraged to make reasonable accommodations when visiting a branch is necessary.
• FCA supports the use of contactless payments and welcomes the industry’s initiative to increase the contactless limit in response to the coronavirus. Contactless payments should be encouraged, but only if the firm sufficiently mitigates the risk of unauthorized transactions and fraud.