The FCA has today announced further support for users of certain consumer credit products, who are facing financial difficulty due to Covid-19.
The 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.
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.”
For customers yet to request a payment freeze or an interest-free overdraft of up to £500, the time to apply for one would be extended until 31 October 2020.
In addition, for those who have already taken up support, firms would continue to offer support with options including a further payment deferral.
The proposals include
- At the end of a payment freeze, firms should contact their customers to find out if they can resume payments.
- Anyone who continues to need help gets help.
- Support for overdraft customers.
- Extending the time the scheme is available to people who may be impacted at a later date.
- 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.
The FCA will welcome comments on these proposals until 5pm on 22 June 2020 and expects to finalise the guidance shortly afterwards.
Furthermore, the guidance only applies to credit cards and other retail revolving credit, such as store cards and catalogue credit, personal loans and overdrafts.
Speaking on the proposals, Alastair Douglas, CEO of finance experts TotallyMoney, said: “TotallyMoney welcomes the extended support for those who might be in financial difficulty as a result of coronavirus. Those worried about needing a payment holiday at a later date will be pleased to hear they can apply until the 31st of October. However, it’s important to understand that interest will still be added during a holiday, so choosing to reduce payments, rather than stop altogether, could be a better option.
“For example, on the average household credit card balance of £2,595, the interest accrued at the average rate of 20.77% APR over a six month period will be £256.79. If you need to apply for a payment holiday or would like to reduce payments, contact your lender as soon as possible. If you stop making payments without letting them know, it will count as a missed payment, which will harm your credit score.”