New rules mean banks and lenders must offer loan and interest freeze
The Financial Conduct Authority (FCA) last week proposed a number of temporary measures to support customers facing payment difficulties as a result of Covid-19.
It has now confirmed the package of measures which banks, building societies and regulated credit providers must follow.
- An up to three month payment freeze on loans, including guarantor loans, logbook loans and home collected credit, and credit cards. Alternatively, customers will be able to pay a token amount.
- Those hit financially by coronavirus who already have an arranged overdraft on their main personal current account, will be charged 0% on the first up to £500 for three months. Customers without an overdraft on their main personal current account are able to request this.
- Firms to ensure overdraft customers are no worse off on price than before recent overdraft changes came into force.
- Credit ratings protected so payment freeze won’t impact ratings.
Firms are entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. However, where a customer requires full forbearance that interest should be waived. These measures aren’t a substitute for the normal forbearance firms should show to those in serious and immediate financial difficulty.
The rules changes are in force from today, but firms have until Tuesday 14 April to implement them. It applies to guarantor loans, logbook loans, home collected credit, a loan issued by Community Development Finance Institution and some loans issued by credit unions, but only where these are regulated.
HSBC, Lloyds, RBS, Barclays, Santander and Nationwide have implemented the changes as of today.
Christopher Woolard, interim chief executive at the FCA, said: “We know many people are suffering financial pressures brought on as a result of the coronavirus pandemic. The measures we’ve announced are designed to provide people affected with short-term financial support through what could be a very difficult time. The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.
“Customers should think carefully before making use of these measures and only do so if they need immediate help. Where they can still afford to make payments, they should continue to do so.
“We know there is still more work to be done, and we will be announcing further measures to support consumers in other parts of the credit market in the future, including in the motor finance sector next week.”