The City regulator will be going ahead with new rules requiring personal loan providers to offer temporary payment freezes to borrowers affected by the Covid-19 pandemic.
The payment freeze will apply to credit card debt, personal loans and overdrafts for households which have been faced with a reduction in income, and would otherwise have been able to make loan payments.
Following a consultation, the Financial Conduct Authority (FCA) announced rules requiring regulated firms to offer payment deferrals for three months where customers are facing or expect to face financial difficulty. The freeze will not affect customers’ credit ratings.
Read more: FCA relaxes SMCR rules during pandemic
The FCA said that peer-to-peer lenders, alongside other sectors like payday loans, are not included in the loans, but would come under normal forbearance rules.
The regulator explained that P2P regulated credit agreements are not covered by the guidance but where a firm that happens to be a P2P platform also carries out regulated lending to consumers where the platform itself is the lender, then that would be covered.
Frank Wessely, partner at business advisory firm Quantuma, said that even if some P2P consumer lenders are not covered by the rules, he would expect platforms to operate in a similar way with their borrowers.
“I’d expect that platforms would want to be seen to be acting in the spirit of this even if they are not covered by the rules, but that would be up to each platform to decide and implement,” he said.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, was pleased to see big banks and the FCA step up to help consumers but said that it’s unfortunate P2P lenders are not covered.
“If covering debt repayments has been keeping you up at night, you may finally sleep more soundly tonight – because the biggest banks are stepping in to help today,” she said.
“It’s incredibly unusual and very welcome to see the FCA react so quickly.
“Unfortunately, not all debts will be covered. If it’s pawn-broking debts or P2P loans keeping you awake at night, you’re likely to have many more sleepless nights ahead, because it has concluded it’s simply too complicated to help people with these debts.
“Instead it has called on the companies concerned to do what they can to help their customers.”
“We know many people are suffering financial pressures brought on as a result of the coronavirus pandemic,” said Christopher Woolard, interim chief executive at the FCA.
“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.”
The rule changes will be in force from today and the full range of measures will apply by Tuesday 14 April 2020.