The Financial Conduct Authority has asked providers of credit cards, store cards, catalogue credit, overdrafts and personal loans to provide additional assistance to customers whose ability to make repayments has been affected by the coronavirus pandemic.
The ongoing health emergency has led to an improvement in their financial situation for many – perhaps their incomes have remained the same while they work from home, while their expenditure in areas such as travel and social has fallen significantly.
On the other hand, many other people have seen their financial situation deteriorate. They may have already been laid off or seen their incomes reduced while on furlough, or they may be newly self-employed and unable to access the Self-Employed Income Support Scheme to compensate for lost earnings. Others may be expecting imminent redundancy, perhaps because the Government has still not explicitly confirmed when their business sector can re-open.
Anyone adversely affected by coronavirus now has until October 31 2020 to request either a £500 interest-free overdraft or a three-month payment freeze.
For customers who have already received forbearance from their credit provider, the FCA says that they should resume repayments if they are able to do so, but that many others will require additional assistance.
When customers come to the end of a previously agreed payment freeze period, firms should contact their customers to find out if they can resume payments, and if so, agree on a plan on how the missed payments could be repaid. If the customer is still unable to make any form of repayment, they should be offered a further payment deferral. If they are able to make reduced payments, the firm must ensure that they only repay what they can afford.
For customers who already have an arranged overdraft, they can request up to £500 interest-free for a further three months. If a customer requires an overdraft of greater than £500, providers should also consider providing further support in the form of lower interest rates on the additional borrowing.
As with previous FCA interventions in this area, any forbearance granted to a customer affected by Covid-19 must not have a negative impact on their credit file, and firms are responsible for ensuring that this does not occur.
Firms will also need to consider whether it is appropriate to refer customers to providers of free debt advice and other money guidance services.
Christopher Woolard, Interim Chief Executive at the FCA, said:
“We have been working closely with other authorities, lenders and debt charities to support consumers in the current emergency. The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus. Where consumers can afford to make payments, it is in their best long-term interest to do so, but for those who need help, it will be there.”
The FCA will announce details of additional support for motor finance, high-cost short-term credit, rent-to-own, pawnbroking and buy-now-pay-later customers in the near future.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.