Help for consumers
Loan and credit card payments to be frozen
Pressure eased on consumers
Banks are being urged to introduce a three-month payment freeze on loans and credit cards where consumers face difficulties with their finances as a result of coronavirus.
This will ensure that for customers who have been hit financially by the coronavirus and already have an arranged overdraft on their main personal current account, up to £500 will be charged at zero interest for up to three months.
The change is expected to come into effect from 9 April.
Christopher Woolard, interim chief executive of the Financial Conduct Authority, said: “Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK.
“This package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time.”
These measures will provide a short-term, temporary stop-gap, for a period of up to three months. These measures would provide an expected minimum level of financial support for consumers who until now have been financially stable.
The FCA says they are not a substitute for its normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty. Where consumers can still afford to make payments, they are advised to do so as normal.
The measures the FCA is proposing include:
Consumers who need additional financial support because of coronavirus with an existing arranged overdraft will be able to request from their provider that up to £500, on their main personal current account, is provided at 0% for up to three months. Alongside this customers without an overdraft on their main personal current account are able to request this facility.
Credit cards, store cards and catalogue credit
Customers facing financial challenges due to coronavirus would be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit. Firms could consider other measures, such as reductions in monthly payments, if appropriate. In addition, customer cards would not be suspended during this period.
Customers with personal loans who face difficulties with their finances as a result of coronavirus would also be able to ask for a three-month freeze if needed.
Treatment of interest
With the exception of the £500 overdraft proposal, firms would be entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. In the event that a customer requires full forbearance that interest should be waived.
Consumers in financial difficulty can also contact the Money and Pensions Service (MaPS) for further guidance.
The FCA will keep these measures under review.