The Financial Conduct Authority (FCA) has today proposed targeted temporary measures to support users of consumer credit products facing financial difficulty due to COVID-19.
The package is intended to complement measures already announced by the government. Furthermore, it aims to support mortgage holders and renters, furloughed employees and the self-employed.
Christopher Woolard, Interim Chief Executive of the FCA, said: “Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK.
“If confirmed, this package of measures we are proposing will help provide affected consumers with the temporary financial support necessary. It will help them weather the storm during this challenging time.”
Given these measures would span a wide variety of firms the FCA is conducting a brief consultation on the measures. However, due to the national emergency, the regulator has asked stakeholders to respond within a much shorter time-frame than normal.
The deadline is set at 9am Monday April 6 2020. If confirmed, the measures will come into force by 9 April 2020.
The proposals are to:
- Set out the FCA’s expectations on firms to offer a temporary payment freeze on loans and credit cards where consumers face difficulties with their finances as a result of coronavirus, for up to three months.
- Ensure that for customers who have been hit financially by the coronavirus and already have an arranged overdraft on their main personal current account, up to £500 will be charged at zero interest for up to three months.
- Require firms to make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes came into force.
- Ensure consumers using any of these temporary measures should not have their credit rating affected because of this.
According to the FCA, the measures will provide a short-term stop-gap, for a period of up to three months.
Lenders do not have to put the measures into place until they come into force. The FCA expects to make a further announcement about these measures next week.
Overdrafts, cards and loans
The measures cover a variety of sectors including overdrafts, cards and personal loans.
Consumers who need additional financial support, because of coronavirus, with an existing arranged overdraft could request that up to £500 from their provider. This will be provided at 0% for up to three months.
Alongside this, customers without an overdraft on their main personal current account are able to request this facility.
In addition, customers could also ask for a three-month payment freeze. They could also ask to pay a nominal payment on credit cards, store cards and catalogue credit. And customers with personal loans could ask for a three-month freeze if needed.
The FCA states, with the exception of the £500 overdraft proposal, firms would be entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. In the event that a customer requires full forbearance that interest should be waived.