The FCA has, this morning, published its draft guidance clarifying the continued treatment of customers experiencing temporary financial hardship due to COVID-19. The FCA is welcoming comments on the proposals until 5pm on 22 June 2020 with the guidance coming into force shortly after that.
The guidance which expires on 31 October can be summarised as follows:
Interest free overdrafts for those in temporary difficulty
Where a customer is experiencing temporary financial difficulties due to COVID-19, the firm must (up until 31 October 2020):
- not charge any interest on an arranged overdraft of up to £500; and
- not charge any interest on the first £500 of an overdraft that is greater than that figure;
- if the arranged overdraft is below £500, the entire overdraft should not accrue interest.
Any interest free period should last for an initial period of 3 months, subject to a 3 month extension on request (such extension beginning on the later of the date the customer requests it or the end of the initial 3 month period).
Alternatively, firms can opt to provide their entire customer base with an interest free period, regardless of whether a customer request it or not.
Where a firm is already providing support, the firm can extend support to those customers automatically or choose to move to only offer support to those eligible customers who request it. However, where a firm is not automatically extending the interest free period, it should communicate this to customers in good time, including@
- when the support will end
- the availability of further support
- that the customer should contact the firm if they need further support
New or increased overdraft facilities can be requested subject to the BAU creditworthiness tests and credit reporting.
Further support for those in temporary difficulty
Customers who require further support should be granted access to preferential interest rates on any borrowing that is not interest free. Firms can make this a standard rate but firms must be able to determine that this rate has been decided with the firm having due regard to the need to provide financial assistance to this cohort of customers.
Where customers are still struggling, firms should consider other means to support them such as:
- offering forbearance (reducing or waiving interest and charges)
- offering a structured repayment plan
Debt help and money guidance
The FCA also have added some suggested debt advice signposting that firms may wish to provide to their customers.