The FCA has today (1st July 2020) confirmed the new guidance for firms on how they treat consumer credit customers who are still experiencing financial difficulties due to Covid-19. The new guidance comes in to force on 3 July 2020 and relates to credit cards (including revolving credit), personal loans and overdrafts.
Summary of the new Guidance:-
The FCA has confirmed:
- Customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500, will have until 31 October 2020 to apply for one.
- If customers can afford to return to regular repayment, or make partial payments, it is in their best interest to do so.
- Firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.
- For customers still facing temporary payment difficulties firms should 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 an additional 3 months.
- Customers who are negatively impacted by Covid-19 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.
- Any payment freezes or partial payment freezes offered under should not have a negative impact on credit files.
- As always firms should be particularly aware of the needs of their vulnerable customers.
- Firms should help customers understand the types of debt help and money guidance that are available and encourage them to access the resources that can help them.
The FCA has confirmed that it will not extend the temporary general expectation in relation to overdraft costs. In April, they asked firms to temporarily ensure all overdraft customers were no worse off on price when compared to the prices they were charged before the recent overdraft rule changes came into force. As was previously the case, firms will be able to set their prices, but, overdraft customers who are financially impacted by Covid-19 will continue to be able to request support on any additional borrowing in excess of £500.
Firms that do choose to increase their charges from this temporary level should give customers impacted by Covid-19 an opportunity to seek extra support before any changes take effect.
The FCA will continue to monitor overdraft pricing.
In addition the FCA has published a statement providing an update following the letter that was sent to firms in January, requesting information on new overdraft pricing.