The British Financial Conduct Authority (FCA) has proposed a number of targeted temporary measures designed as a “stop-gap” to quickly support users of certain consumer credit products, who are facing a financial impact because of the exceptional circumstances caused by the coronavirus crisis, according to a statement published by the regulator today.
If confirmed, these measures would provide an expected minimum level of financial support for consumers who, until now, have been financially stable.
“This package is intended to complement measures already announced by the government to support mortgage holders (and renters) and the assistance being provided for furloughed employees and the self-employed,” the FCA said.
“Given these measures would span a wide variety of firms, the FCA is conducting a brief consultation on our measures. However, given the national emergency and the significant impact on consumers’ finances right now, we have asked all stakeholders to respond within a much shorter time frame than normal – with a deadline of 9am on Monday, April 6 2020. If confirmed the measures would start to come into force by April 9 2020”, it added.
The FCA proposes to set out its expectations on firms to offer a temporary payment freeze on loans and credit cards, where consumers face difficulties with their finances due to the COVID-19 crisis, for up to three months.
It ensures that for customers, who have been hit financially by the coronavirus outbreak 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.
The regulator requires 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.
Additionally, it ensures consumers using any of these temporary measures, that they should not have their credit ratings affected because of this.
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Temporary financial aid
“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 today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time,” Christopher Woolard, Interim Chief Executive of the FCA, said.
The measures are not a substitute for our normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty, according to the FCA’s statement.
“Where consumers can still afford to make payments, they should as normal and this is likely to be in their best long-term interest to continue to do so,” it said. According to the FCA, lenders do not have to put these measures in place until they come into force. It may take a short period of time for lenders to put in place arrangements to provide these measures. Consumers should not contact their lender yet unless their lender is already offering voluntary assistance.
The regulator expects to make a further announcement about these measures next week.
Overdraft rules, as stated above, come into force on April 6.
Customers facing financial challenges due to coronavirus would be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards, and catalog credit.
Customers with personal loans who face difficulties with their finances as a result of coronavirus would also be able to ask for a three-month freeze if needed, the FCA says.
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, according to the statement
The FCA will keep these measures under review.