FCA to enforce payment freeze on consumer credit productsApril 2, 2020
The Financial Conduct Authority (FCA) has today proposed a range of targeted temporary measures designed as a stop-gap to quickly support users of certain consumer credit products who are facing a financial impact because of the exceptional circumstances arising from coronavirus.
Given these measures would span a wide variety of firms the FCA is conducting a brief consultation on our measures. However, given the national emergency and the significant impact on consumers’ finances right now, we have asked all 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 2020.
Set out the FCA’s expectations on firms to offer a temporary payment freeze on loans and credit cards where consumers face difficulties with their finances as a result of coronavirus, for up to three months.
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.
Require firms to make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes came into force.
Ensure consumers using any of these temporary measures should not have their credit rating affected because of this.
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.”
If confirmed, 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. They are not a substitute for our 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 should as normal and this is likely to be in their best long-term interest to continue to do so.
Lenders do not have to put these measures in place until they come into force. It may take a short period of time for lenders to put in place arrangements to provide these measures. Consumers should not contact their lender yet unless their lender is already offering voluntary assistance. The FCA expects to make a further announcement about these measures next…