FCA sets out new proposals for tailored consumer credit and overdraft support

The FCA has announced new proposals for firms to provide tailored support for users of consumer credit and overdraft products facing financial difficulties due to COVID-19.

The proposals will cover users of credit cards and other revolving credit (store card and catalogue credit), personal loans, overdrafts, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products.

During the initial phase of the pandemic, payment deferrals provided millions of consumer credit borrowers with immediate and temporary support. The FCA has now indicated that many customers who have had a payment deferral are “expected to resume full repayment”, but noted that some will remain in financial difficulty.

In its guidance, the regulator said it would expect its firms to provide tailored support to customers which “reflects their individual circumstances”, and to work with customers approaching the end of a payment deferral to provide support before they miss payments. The FCA also suggested that firms should be “flexible” and employ a full range of shorter and longer-term options, to minimise stress and anxiety experienced by customers.

Firms will also be expected to put sustainable repayment arrangements in place which take account of their customers wider financial situation, including other debts and essential living expenses.

Furthermore, the latest guidance has proposed that firms contact overdraft customers who have received temporary support to determine if they still require assistance. Where a customer needs further support, the regulator suggested that firms use measures such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring debt.

FCA interim chief executive, Christopher Woolard, said: “Our proposals are designed to help people who have been facing payment difficulties because of the pandemic get back on track with tailored support from firms. For those who can restart payments, it is in their best interests to do so.”

The FCA stated that it expects its current guidance in place will expire on 31 October, but suggested this will be kept under review “depending on how the wider situation develops”.

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