The Financial Conduct Authority (FCA) has proposed a three-month temporary payment freeze on loan and credit card repayments to help consumers cope with the “unprecedented financial shock” triggered by the COVID-19 coronavirus lockdown.
The FCA has today (April 2) set-out a series of proposed targeted temporary measures which it said were intended to complement measures already announced by the government to support mortgage holders (and renters) and the assistance being provided for furloughed employees and the self-employed.
In a statement issued today, the FCA indicated that consultation on the issue would be fast-tracked in order to provide rapid relief where possible.
It said: “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 April 6, 2020.”
If confirmed, the measures will start to come into force by April 9, 2020, the FCA said.
The FCA’s proposals are to:
- 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.”
Motorists are sure to be among those keen to suspend repayments during the period of low- or zero- income during the UK’s coronavirus-enforced lockdown.
In an interview with AM, the Finance and Leasing Association’s (FLA) head of motor finance, Adrian Dally, said that every effort should be made to keep motorists “in their cars” as coronavirus inhibits some consumers’ ability to make repayments.
“How we support our customers now is really critical,” he said.
“We are having conversations with all the relevant authorities to determine exactly what that support looks like. It’s clear that many customers will require support to help bridge them through this period.
“In a nutshell, in the motor finance sector, what it means is keeping customers in their cars is what’s needed.”