The UK’s top financial regulator has suggested the firms should contact customers to find out if they can resume payments. This would lead to an agreed plan on how they can make up missed payments, where customers can resume paying it is in their best interest to do so, the regulator said.
Under the proposal, those in need of continued help will get it.
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 3 months.
It also accounts for the knock-on effects of financial difficulties, and extends the scheme for those that might need it at a later date.
Banking customers who have not yet had a payment freeze or an arranged interest-free overdraft of up to £500 and experience temporary financial difficulty, due to coronavirus, would be able to request one up until 31 October 2020.
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This help would not impact credit files, but would have the potential to affect credit ratings in the future, as that information is not the only source which lenders use to assess creditworthiness.
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.”
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 benefited most customers).
The regulator 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. The FCA will continue to monitor overdraft pricing.
Banks have until Monday to comment on these proposals, which are expected to be implemented soon after.
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Other support measures for people with car finance, payday loans, rent-to-own deals, pawnbroking, and buy-now-pay-later agreements will be updated at a later date.
These measures were originally approved on a tight turnaround, going from proposal to implementation in under four days.
The FCA has proved it’s willing to act fast to shore up people’s finances and make sure banks aren’t taking advantage of people in difficult economic times.