The Financial Conduct Authority (FCA) has launched an emergency four-day consultation on plans for temporary measures to help consumers manage their credit in the face of the financial impact of the coronavirus epidemic
The proposals include requiring firms to offer a temporary payment freeze on loans, credit cards, store cards and catalogue credit where consumers face difficulties with their finances as a result of coronavirus, for up to three months.
Firms could consider other measures, such as reductions in monthly payments, if appropriate. In addition, customer cards would not be suspended during this period.
Lenders should also 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.
Alongside this customers without an overdraft on their main personal current account are able to request this facility.
The FCA’s previously announced overdraft rules come into force on 6 April. Firms can only charge a single annual interest rate for arranged and unarranged overdrafts.
The regulator said that while, overall, this will significantly reduce the cost of unarranged borrowing, some firms have recently decided to increase their arranged overdraft prices. Over the next 90 days, firms would have to ensure all consumers are no worse off and not paying more than they would have paid under previous prices.
They will also have to ensure consumers using any of these temporary measures should not have their credit rating affected because of this.
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.
Christopher Woolard, interim chief executive of the FCA, said: ‘Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK.
‘If confirmed, 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.’
The FCA’s aim is for the measures to provide a short-term, temporary stop-gap, for a period of up to three months, offering an expected minimum level of financial support for consumers who until now have been financially stable. The regulator said this guidance would not prevent firms from offering more generous assistance to their customers, and some already are.
Given the national emergency and the significant impact on consumers' finances right now, the FCA is asking stakeholders to respond within a much shorter timeframe than normal – with a deadline of 9am Monday 6 April 2020. If confirmed the measures would start to come into force by 9 April.