- 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 3 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 October 31 2020.
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- 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.
These rules will come into force on July 3, which is two days away.
It was also detailed that the FCA will not extend the temporary general expectation rules they implemented in relation to overdraft costs.
The regulator published a statement which provided an update on a letter that was sent to firms in January requesting information on new overdraft pricing.
Christopher Woolard, the Interim Chief Executive at the time the proposals were first drawn up (the FCA now have a permanent Chief Executive in place), made the following comments as the announcements were revealed: “’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.”
While the announcement will likely be relieving for those it affects, MoneySuperMarket have warned of potential long term consequences.
A spokesperson for the company provided the following comments: “The further measures of support confirmed this morning by the FCA for consumer credit customers are welcome. But it’s important to stress that all these measures are temporary and don’t solve the longer term challenges faced by many borrowers.
“Borrowers should think carefully before requesting further interest freezes or renegotiating their payment rates – in particular they should make sure that they have a clear understanding of the impact this will have on their interest payments down the line.
“If you’re struggling with products such as loans, overdrafts or credit cards, you should consider whether you can consolidate or transfer your debts into products with better, more manageable rates. For example, some balance transfer credit cards are currently offering zero percent interest on transferred balances for up to two years.”