FCA unveils new support for consumer credit customers

The FCA has announced new plans to provide support for users of consumer credit products who are experiencing financial difficulty because of coronavirus.

For customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500, the time to apply for one would be extended until 31 October 2020.

The regulator also announced that for those who have already taken up support and are still experiencing temporary payment difficulties, firms would continue to offer support – with options including a further payment deferral, or reducing payments to an amount the customer can afford for a further three months.

Under the new plans, overdraft customers who are negatively impacted by COVID-19 and who already have an arranged overdraft on their main personal current account, would be allowed to request up to £500 interest-free for a further three months.

FCA interim chief executive, Christopher Woolard, said: “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 proposals outline the support that firms would be expected to provide for credit card and other revolving credit and personal loan customers coming to an end of a payment freeze, as well as those who are yet to request one, the regulator added.

“The payment holiday is over for an awful lot of people,” Hargreaves Lansdown personal finance analyst, Sarah Coles, commented.
“The FCA has proposed plans that will let some people stretch their holiday for longer, but it’ll be harder to qualify, and even if you do, the banks can refuse if they think the break could do you more harm than good. This feels like a blow to borrowers, but it’s actually a very sensible move, designed to protect people from a nightmare further down the road.
“These loans and cards can come with hefty interest rates, so putting off repayments will build up the interest you’ll eventually have to pay, creating an even bigger debt mountain to climb when you’re back on your feet.
“But the proposals deliver a real kick in the teeth for borrowers. Banks will be able to ramp up overdraft charges to the sky-high levels they were planning before this all kicked off: suddenly you could be left paying around 40% interest on your coronavirus debts. This feels like an awful time to be dropping this kind of burden on people.”

The FCA said it is welcoming comments on its proposals until 5pm on 22 June 2020 and is expected to finalise the guidance shortly afterwards.

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