The FCA intends to extend the support offered to users of certain consumer credit products, who are facing a financial impact because of the exceptional circumstances arising from coronavirus
Its proposals outline the support firms would be expected to provide credit card and other revolving credit (store card and catalogue credit) and personal loan customers coming to an end of a payment freeze, as well as those who are yet to request one.
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.
For those who have already taken up support and are still experiencing temporary payment difficulties due to coronavirus, 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.
The regulator previously announced that firms should offer payment holidays in early April, when the term was set at three months. The latest proposals offer an additional three months’ flexibility.
Christopher Woolard, FCA interim chief executive, 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.'
Under the FCA proposals, at the end of a payment freeze, firms should contact their customers to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.
For customers still facing temporary payment difficulties as a result of coronavirus, firms should provide them with support by reducing payments on their credit card and personal loans to a level they can afford for three months.
Customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, can request up to £500 interest-free for a further three months. The FCA also says firms should provide 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.
Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files.
In April, the FCA set a temporary general expectation across the market that firms should ensure all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft rule changes came into force (those changes benefitted most customers). The FCA does not propose to extend this temporary measure across the whole market.
However, overdraft customers who are financially impacted by coronavirus will continue to be able to request a reduced interest rate on any additional borrowing in excess of £500, and the FCA says it will continue to monitor overdraft pricing.
The proposals are open for comment until 22 June, and the FCA expects to finalise the guidance shortly afterwards.
Draft guidance on credit cards