September 16, 2020 9:50:43 AM
A further support package to help overdraft, credit card and personal loan customers who are struggling with their finances due to Covid-19 has been proposed by the City regulator.
Current support measures, which include the option of payment holidays, are set to expire on October 31.
The Financial Conduct Authority is proposing new measures which will give tailored support based on a customer’s own circumstances to those who continue to need help, or who may need it for the first time. It wants to hear feedback on the draft guidance by September 21.
Under the proposals, firms will need to contact overdraft customers who have received temporary support to find out if they still need help.
Where a customer needs further support, firms should use measures such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt, the draft guidance says.
If the measures are confirmed, the FCA said firms should prevent struggling customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.
It expects firms to work with customers approaching the end of a payment holiday to provide support before they miss payments.
The FCA said firms should be flexible and employ a full range of shorter and longer-term options to support their customers to minimise stress and anxiety.
Affordable payment arrangements should be put in place which also take into account customers’ wider circumstances, the FCA said.
Customers should not be pressured into paying they debts within an unreasonably short period of time and the needs of vulnerable customers should also be recognised, it said.
Customers should be given time to consider their options and to seek debt advice if necessary before deciding on the support they take.
The proposals will also cover users of some other types of credit such as store cards, catalogue credit, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit.
Christopher Woolard, interim chief executive at the FCA, said: “Our proposals are designed to help people who have been facing payment difficulties because of the pandemic get back on track with tailored support from firms. For those who can restart payments, it is in their best interests to do so.”
The FCA said it will monitor firms to ensure borrowers are treated fairly having regard to their individual circumstances.
Similar measures have already been confirmed for mortgage customers.
Where consumers require further support from firms, either at the end of payment holidays, or where they need support for the first time, this will be reflected on credit files.
The FCA said it will help lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending.
It expects firms should be clear about the credit file implications of any forms of support offered to consumers.