3rd April 2020

FCA proposes temporary financial relief for customers impacted by coronavirus
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The Financial Conduct Authority(FCA) has proposed a range of targeted temporary measures designed as a stop-gap to quickly support users of certain consumer credit products who are facing a financial impact because of the exceptional circumstances arising from coronavirus.

This package is 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.

Given these measures would span a wide variety of firms the FCA is conducting a brief consultation on its measures. However, 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 6th April 2020. If confirmed the measures would start to come into force by 9th April 2020.
The FCA's proposals are:
-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, comments 2Coronavirus 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."

If confirmed, these measures will provide a short-term, temporary stop-gap, for a period of up to three months. These measures would provide an expected minimum level of financial support for consumers who until now have been financially stable. They are not a substitute for our normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty. Where consumers can still afford to make payments, they should as normal and this is likely to be in their best long-term interest to continue to do so.

Lenders do not have to put these measures in place until they come into force. It may take a short period of time for lenders to put in place arrangements to provide these measures. Consumers should not contact their lender yet unless their lender is already offering voluntary assistance. The FCA expects to make a further announcement about these measures next week.
This guidance would not prevent firms from offering more generous assistance to their customers, and some already are.

The measures the FCA are proposing include:
-Overdrafts
Consumers who need additional financial support because of coronavirus with an existing arranged overdraft will be able to request from their provider that up to £500, on their main personal current account, is provided at 0% for up to three months. Alongside this customers without an overdraft on their main personal current account are able to request this facility.
The FCA previously announced overdraft rules come into force on 6th April. Firms can only charge a single annual interest rate for arranged and unarranged overdrafts. This will significantly reduce the cost of unarranged borrowing, also providing vital protection during this period. The end of fees and charges for borrowing means that all consumers will be clear about what they’re paying. Under the FCA’s rules over 7/10 consumers will be better off or no worse off. In some firms, even more consumers are due to benefit.
However, some firms have recently decided to increase their arranged overdraft prices. Over the next 90 days, firms would have to ensure all consumers are no worse off and not paying more than they would have paid under previous prices.
-Credit cards, store cards and catalogue credit
Customers facing financial challenges due to coronavirus would be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit. Firms could consider other measures, such as reductions in monthly payments, if appropriate. In addition, customer cards would not be suspended during this period.
-Personal loans
Customers with personal loans who face difficulties with their finances as a result of coronavirus would also be able to ask for a three-month freeze if needed.
-Treatment of interest
With the exception of the £500 overdraft proposal, firms would be entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. In the event that a customer requires full forbearance that interest should be waived.
Consumers in financial difficulty can also contact the Money and Pensions Service(MaPS) for further guidance.
The FCA will keep these measures under review.
Stephen Jones, Chief Executive of UK Finance, said “All lenders are ready to support their customers during this unprecedented situation, with many individual firms already helping with relief on overdrafts and other unsecured debts.
“We have been talking with the regulators about the need to change the rules to enable lenders to provide further help for their customers, where it is needed most. The proposed changes to the FCA’s rules should enable lenders to deliver further support to their customers and we will continue to work with the regulator as part of the industry’s commitment to get the country through these difficult times.
Lenders want to ensure that customers are both helped with their current financial circumstances and able to manage their borrowing when the crisis has passed. It is critical that the FCA’s proposals do not disrupt the provision of credit to borrowers and takes account of the business models of all credit providers including those outside the mainstream market.
Firms have been taking a record volume of calls due to COVID-19 while facing the same pressures on staffing as the rest of the country. Where possible we would therefore encourage customers to check their lender’s website first to see if it answers their question, and consider getting in touch via online chat, social media and online banking and mobile apps.”

Jenny Clayton, Financial Services Partner at EY, comments on yesterday's announcement from the FCA proposing temporary financial relief for customers impacted by coronavirus, comments “This proposed relief package from the regulator will do just that; provide relief to scores of people now relying on credit cards to pull through in this time of financial downturn without fear of mounting interest bills. The package crystallises formally into regulation some of the good practices that leading firms have already been putting in place to support the fight and protect those who have temporarily lost some or all of their income. Customer requests and queries will now likely start to flood in, putting pressure on credit providers to rapidly operationalise processes to support the measures. This will add to already stretched helplines and customer service centres, and but since the start, the industry has shown that it is part of the financial solution to this crisis, and is anticipated to back this regulatory package to support customers.”