FCA introduces credit card and loan freeze to help consumers through coronavirus
The Financial Conduct Authority (FCA) announced a package of measures today to help customers with credit cards and loans during the coronavirus lockdown.
The City watchdog said the measures would help provide temporary financial relief to people with commonly used consumer credit products.
Firms are expected to offer customers a temporary payment freeze on loans and credit cards for up to three months for customers negatively affected by coronavirus.
Payment freezes will be offered from today by HSBC, Lloyds, RBS, Barclays, Santander and Nationwide.
Other banks and lenders offering store cards, catalogue credit, guarantor loans, logbook loans, home-collected credit, credit unions and community development finance will offer payment freezes from 14 April.
The FCA said customers hit by coronavirus who already have an overdraft on their main current account should be allowed an overdraft of up to £500 charged at zero interest for three months.
Lenders should make sure 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.
The FCA said customers should not have their credit history hit by using any of these measures.
Christopher Woolard, interim chief executive at the FCA, said: “The measures we’ve announced are designed to provide people affected with short-term financial support through what could be a very difficult time.
“The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.
“Customers should think carefully before making use of these measures and only do so if they need immediate help. Where they can still afford to make payments, they should continue to do so.
“We know there is still more work to be done, and we will be announcing further measures to support consumers in other parts of the credit market in the future, including in the motor finance sector next week.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “It’s incredibly unusual and very welcome to see the FCA react so quickly. Rather than waiting until it has a solution for every kind of debt before launching the lot, it is pushing this through quickly, and will pick up on payday loans and car payments as soon as it can.
“Unfortunately, not all debts will be covered. If it’s pawn-broking debts or peer-to-peer loans keeping you awake at night, you’re likely to have many more sleepless nights ahead, because it has concluded it’s simply too complicated to help people with these debts. Instead it has called on the companies concerned to do what they can to help their customers.”
Eric Leenders, managing director of personal finance at banking lobby group UK Finance, said: “Lenders stand ready at this most difficult of times to support customers and help the country get through this crisis and welcome today’s package of measures from the FCA to help deliver this.
“We would remind customers of the FCA’s own guidance to think carefully before making use of these measures and only do so if they need immediate help. Where customers can still afford to make payments, they should continue to do so.