Coronavirus (COVID-19): Update FCA Urgent Consultation: Temporary Financial Relief For Borrowers
The Financial Conduct Authority (FCA) has today issued three Guidance Consultation documents to the lending sector proposing a range of targeted temporary measures designed to help consumers during the Coronavirus Pandemic.
The consultation is targeted at banks, building societies, credit card and store card issuers and other providers of consumer credit loans. The proposed measures are intended as an emergency measure.
They will provide urgent but temporary support to users of certain consumer credit products who are facing a financial impact because of the exceptional circumstances arising from Coronavirus.
The FCA is conducting an extremely brief consultation on the proposed measures.
The consultation begins today (2 April 2020) with a deadline of 9am Monday 6 April 2020. If confirmed the measures would start to come into force by 9 April 2020.
It is intended the measures would be in force for up to 3 months.
The proposals focus on ensuring consumers have access to cash or credit at a time when many may be financially stretched but do not have to pay severe charges or interest penalties as a consequence. The proposals are summarised below.
- The FCA expects 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.
- The FCA expects firms to 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 FCA will 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.
- The FCA will require firms to ensure consumers using any of these temporary measures should not have their credit rating affected because of this.
This package is intended to complement measures already announced by the government to support mortgage holders and tenants in the rental sector and the assistance being provided for furloughed employees and the self-employed. The FCA has already issued separate guidance to banks, mortgage lenders and insurers regarding dealing with consumers during the Coronavirus Pandemic.
In setting out its proposals and the extremely short consultation period, the FCA has cited the need to act to protect consumers at a time of national emergency.
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 week.
These proposals from the FCA would not prevent firms from offering more generous assistance to their customers. Some banks and lenders are already offering more favourable assistance to consumers than that proposed by the FCA.