The City regulator is going ahead with extra measures to support consumer credit customers who are struggling during Covid-19.
In April, the Financial Conduct Authority (FCA) introduced rules requiring personal loan providers to offer temporary payment freezes to borrowers affected by the pandemic.
The regulator has now gone ahead with these proposals.
The FCA said firms should contact their customers to find out if they can continue payments, and if so, they should agree a plan on how the missed payments could be repaid. It said if customers can afford to return to regular repayments it is in their best interest to do so.
This guidance only applies to credit cards and other credit facilities, such as store cards and catalogue credit, personal loans and overdrafts.
The FCA said any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files.
It added that firms should continue to provide support to customers which are still facing temporary payment difficulties because of the coronavirus pandemic. Options include a further payment deferral, or a reduction of payments to an amount the customer can afford for a further three months.
“Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic,” said Christopher Woolard (pictured), interim chief executive at the FCA.
“For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.”
Businesses 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.
The FCA also provided an update on banks’ overdraft pricing decisions, with the regulator noting that following a review of the evidence to date, it does not intend to open a formal investigation at this stage.
Overdraft customers who are financially impacted by coronavirus will continue to be able to request support on any additional borrowing in excess of £500.
The regulator said that it will continue to monitor overdraft pricing, and advised those firms that choose to increase their overdraft charges should give customers impacted by Covid-19 an opportunity to seek extra support before any changes take effect.