FCA Confirms Further Support For Borrowers | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 01/07/2020

The Financial Conduct Authority (FCA) has confirmed plans to provide extra support to consumers struggling financially due to the Coronavirus pandemic, including borrowers being able to request up to £500 interest-free overdrafts for another three months.
In the support plans set out by the FCA, banks and building societies will continue providing support to customers facing financial difficulties due to the pandemic, which can include freezing or reducing payments on their credit card and personal loans to a level they can afford for three months.

While the FCA has confirmed further support for borrowers, it has also urged consumers who are able to afford to return to their regular repayments, or partial repayments, to do so. Borrowers should be aware that interest continues to be accumulated to debt during payment holidays, which results in having a higher amount of debt to pay back once the repayment freeze comes to an end. Lenders should contact customers who are coming to the end of the initial three-month payment holiday to discuss resuming their repayments and setting out a plan to repay the missed payments.

Support for overdraft debt

As well as this, the FCA has announced that customers who already have an arranged overdraft on their main personal current account can request up to £500 interest-free for a further three months. But, borrowers should be aware that although they can make the request, lenders are not obligated to grant the request. Saying this, the FCA has stated that: “Firms will also provide these customers with further support where it is needed including reducing the cost of borrowing above the interest-free buffer, especially if this cost of borrowing would otherwise increase”.

In addition to this, banks can now continue with the planned overdraft fee changes that were set out before the pandemic began to impact the UK economy. These changes were due to be introduced in response to the FCA’s ban on fixed overdraft fees, along with its ruling that unarranged overdraft fees cannot be higher than those charged on arranged overdrafts. As the pandemic began to impact the UK economy, these changes were largely put on hold at the FCA’s request to banks to ensure that overdraft customers were no worse off on price than before the overdraft fee changes.

Banks looking to increase their overdraft charges are being requested to provide extra support to those who have borrowed in excess of £500 on their overdrafts.

Additional support for borrowers

Further support set out by the FCA today ensures that those in financial difficulty due to the pandemic and who have not yet requested a payment holiday or an interest-free overdraft of up to £500, can make a request up until 31 October 2020.

Any payment holidays or partial payment freezes offered due to the Coronavirus pandemic should not negatively impact consumers’ credit files, but borrowers should be aware that credit files are not the only source of information lenders can use to assess creditworthiness.

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