Consumers who have been financially impacted by the Coronavirus pandemic could be given additional support to help cope with credit, loan and overdraft repayments.
Today, the Financial Conduct Authority (FCA), which regulates the finance industry, has announced proposals that would see credit lenders, including those who lend through credit cards, store cards and catalogue credit, as well as personal loan lenders, provide additional support for those struggling to meet credit repayments and who have already taken out payment holidays.
These proposals include:
- Lenders contacting customers coming to the end of the payment freeze to find out if they can resume payments, and if so, to agree a plan on how the missed payments could be repaid.
- Borrowers who are still struggling financially due to the Coronavirus pandemic should be given support by having the repayments on their credit card and personal loans reduced to an affordable level for three months.
- Overdraft borrowers who continue to face financial difficulties due to the pandemic and who already have an arranged overdraft on their main personal current account should be able to request up to £500 interest-free for a further three months. They should also be provided with further support in the form of lower interest rates on borrowing above the interest-free buffer and repayment plans for those who would benefit from them.
- Any payment freezes or partial payment freezes taken out by borrowers as part of the scheme to help consumers financially during the pandemic should not negatively impact their credit files. Saying this, it is important for consumers to be aware that credit files are not the only source of information lenders can use to assess creditworthiness.
Commenting on the proposals, 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 is accepting comments on these proposals until 5pm on 22 June 2020 and expects to finalise the guidance shortly after this date.
