The City watchdog, ‘The Financial Conduct Authority’ (FCA) has today proposed a number of temporary financial measures to assist those with lending who are struggling due to the Covid-19 pandemic. This will potentially benefit those with personal loans, overdrafts, credit and store cards. If you have any of these forms of lending, here’s what you need to know:
WHAT ARE THE PROPOSED MEASURES?
If confirmed, these measures will provide a short-term, temporary stop-gap, for a period of up to three months. These measures would provide an expected minimum level of financial support for consumers who, until now, have been financially stable. The proposed measures are as follows:
Consumers who need additional financial support because of coronavirus with an existing arranged overdraft will be able to request from their provider that up to £500 on their main personal current account, is provided at 0% for up to three months. Alongside this, consumers without an overdraft on their main personal current account are able to request this facility.
This will complement new rules already imposed by the FCA in relation to overdrafts, which state that firms can only charge a single annual interest rate for arranged and unarranged overdrafts. This will significantly reduce the cost of unarranged borrowing, also providing vital protection during this period. The end of fees and charges for borrowing means that all consumers will be clear about what they’re paying.
Credit cards, store cards and catalogue credit
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 catalogue credit. Firms are also being told by the FCA that they can also consider other measures, such as reductions in monthly payments, if appropriate. In addition, customer cards would not be suspended during this period.
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.
Treatment of interest
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.
WHEN WILL THE MEASURES TAKE AFFECT?
Given these measures would span a wide variety of firms, the FCA is conducting a brief consultation on the measures being implemented, which is due to end on 6 April. If confirmed, the measures would start to come into force by 9 April 2020.
I will provide a further update once the proposed measures have been confirmed.