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FCA confirms next stage of support for consumer credit customers

Written by: Emma Lunn
The regulator is asking firms to provide tailored support for users of consumer credit and overdraft products who continue to face payment difficulties due to coronavirus.

The measures apply both to consumers who have taken payment holidays so far, as well as people who have not accessed support up until now.

The guidance covers users of:

  • credit cards
  • store cards
  • catalogue credit
  • personal loans
  • motor finance
  • buy-now pay-later
  • rent-to-own
  • pawnbroking
  • high-cost short-term credit products
  • bank overdrafts

From 2 October, the Financial Conduct Authority (FCA) expects financial firms to provide tailored support to customers to support their circumstances.

It says firms should work with customers approaching the end of a payment holiday to provide support before they miss payments.

Firms should give customers time and opportunity to repay and they shouldn’t be pressurised into repaying their debt within an unreasonably short period of time.

The FCA also says that firms should put in place affordable “sustainable repayment arrangements” which take account of customers’ wider financial situation.

It said that after a repayment arrangement has been agreed, firms should prevent customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges.

The regulator also says it also expects banks to contact overdraft customers who have received temporary support to determine if they still require help.

Where a customer needs help, banks are expected to reduce or waive interest, agree a programme of staged reductions in the overdraft limit, or support the customer to reduce their overdraft usage by transferring the debt.

Credit records will be affected

The FCA says that 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 in accordance with normal reporting processes.

It says this will help ensure lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending.

Christopher Woolard, FCA interim chief executive, says: “For those who can restart payments, it is in their best interests to do so. However, for those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local or national responses to the crisis. There should be no ‘one size fits all’ approach taken by firms to help consumers get back on track.”

Valentine Mulholland, senior policy and propositions manager at the Money and Pensions Service says: “The measures confirmed today will be helpful for people with credit or overdraft commitments who continue to face financial difficulty after the end of October. If people are still struggling with their finances at the end of payment holidays, they shouldn’t suffer in silence.

“It’s crucial they contact the firm to find out what support they can offer, and be aware they don’t have to agree to a repayment arrangement if they cannot afford it. Anyone who is worried about money in the wake of Covid-19 can also use the Money Navigator Tool on the Money Advice Service website to find a way forward with their finances.”

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