Firms may need to reduce or waive interest for Covid-hit credit and overdraft users
The financial regulator has set out a number of proposals to ensure overdraft and consumer credit customers continue to be supported if they face further payment difficulties due to coronavirus.
Credit card customers as well as those with personal loans, overdrafts, car finance, buy-now-pay-later, rent-to-own, pawnbroking and payday loans were offered payment freezes at the start of the pandemic.
The measures were extended until the end of October and the Financial Conduct Authority (FCA) said many customers who have taken a payment deferral are expected to resume full repayment.
However, it acknowledged that for some, they will remain in financial difficulty due to the ongoing coronavirus crisis.
As part of its proposals, it expects firms in the sector to:
- Provide tailored support which reflects individual customers’ circumstances
- Work with customers approaching the end of a payment deferral to provide support before they miss payments
- Be flexible and employ a full range of shorter and longer-term options to support customers to minimise stress and anxiety experienced
- Put in place sustainable repayment arrangements which are affordable and take account of a customer’s wider financial situation including other debts and essential living expenses
- Give customers time and opportunity to repay and not pressurise them into repaying their debt within an unreasonably short period of time
- Prevent customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges necessary
- Recognise and respond to the needs of vulnerable customers.
The FCA said it will monitor firms to ensure borrowers are treated fairly and customers should be given time to decide on the support they need to take.
It is also proposing for firms to contact overdraft customers who have received temporary support to determine if they still require assistance.
Where a customer needs further support, firms should again look to reduce or waive interest, agree a programme of staged reductions in the overdraft limit, or support customers to reduce their overdraft usage by transferring the debt.
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 consultation runs until 21 September 2020.