FCA confirms further support for consumer credit customers

The Financial Conduct Authority (FCA) has today confirmed the support users of certain consumer credit products will receive if they are still experiencing temporary payment difficulties due to coronavirus (Covid-19).

The measures outline the options firms will provide credit card and other revolving credit (store card and catalogue credit) and personal loan customers who are coming to the end of a payment freeze and for customers who have agreed an arranged interest-free overdraft of up to £500. Customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500, will have until 31 October 2020 to apply for one.

Christopher Woolard, Interim Chief Executive at the FCA, said: “Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic. For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.”

The FCA has confirmed:

• If customers can afford to return to regular repayment, or make partial payments, it is in their best interest to do so.
• Firms should contact customers coming to the end of a first payment freeze 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 will provide them with support, which could include freezing or 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. Firms will also provide these customers with further support where it is needed including reducing the cost of borrowing above the interest-free buffer, especially if this cost of borrowing would otherwise increase.
• Customers that 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
• Any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and should consider how they engage with them. Firms should also help customers understand the types of debt help and money guidance that are available and encourage them to access the resources that can help them.

The FCA has confirmed that it will not extend the temporary general expectation in relation to overdraft costs. In April, we asked all firms to temporarily ensure all overdraft customers were 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). As was previously the case, firms will be able to set their prices, but, overdraft customers who are financially impacted by coronavirus will continue to be able to request support on any additional borrowing in excess of £500.  Firms that do choose to increase their charges from this temporary level should give customers impacted by coronavirus an opportunity to seek extra support before any changes take effect.

The FCA will continue to monitor overdraft pricing. In addition to today’s proposals, the FCA has published a statement providing an update following the letter that was sent to firms in January, requesting information on new overdraft pricing.

This guidance comes into force on 3 July 2020 and only applies to credit cards (and other retail revolving credit, such as store cards and catalogue credit), personal loans and overdrafts.

It does not apply to other consumer credit products, such as motor finance, high-cost short-term credit, rent-to-own, pawnbroking and buy-now pay-later, which are covered by separate guidance which will be updated soon.