Following a short consultation, the FCA has now confirmed a package of targeted temporary measures to help individuals with some of the most commonly used consumer credit products.
The measures are intended for those that cannot afford to continue to make payments due to the “financial pressures brought on as a result of the Coronavirus pandemic” according to Christopher Woolard, interim Chief Executive at the FCA. Mr Woolard added that the measures announced are “designed to provide people affected with short-term financial support through what could be a very difficult time,” and that “the changes will provide support for consumers with credit cards, loans and overdrafts.”
The full range of measures came into effect on 14 April 2020, however firms were notified of the rule changes the week prior in order to allow time to ensure they had the appropriate level of resources available to handle customer requests. Banks and building societies that had already started implementing changes since last week include; HSBC, Lloyds, RBS, Barclays, Santander and Nationwide. Following consultation, the FCA guidance has clarified that alongside mainstream credit products, guarantor loans, logbook loans, home collected credit, loans issued by Community Development Finance Institution and some loans issued by credit unions, are also subject to the guidance. The guidance also applies to firms which have acquired such loans.
What this means for firms
Firms will be expected to help those consumers negatively impacted by the Coronavirus by:
- offering a temporary payment freeze on loans and credit cards for up to three months;
- allowing customers who already have an arranged overdraft on their main personal current account up to £500 charged at zero interest for three months;
- making sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft pricing changes came into force; and
- ensuring consumers using any of these temporary payment freeze measures will not have their credit file affected.
These changes prompt resourcing considerations as firm call centres are likely to feel added pressure with customers requesting assistance in relation to the new measures, which will be in addition to the already high demand in calls due to the current pandemic.
Whether these measures are appropriate for all consumers experiencing financial difficulties because of the Coronavirus will be subject to case by case analysis. Indeed, the FCA has made it clear that these measures will not replace normal forbearance rules where these would be more suitable for a consumer in serious and immediate financial difficulty.
Finally, this is a space to be watched as these decisions are constantly under review. Initially the FCA stated the proposals did not apply to high-cost short-term credit, buy-now pay-later or hire purchase (including motor finance) products. However, the FCA are now considering what further measures are needed in relation to these products and expect to announce new measures shortly.