ii comment on FCA proposals to support consumer credit customers

Read what our experts think of FCA support for those using certain consumer credit products.

The Financial Conduct Authority (FCA) has today announced proposals to offer continued support for users of certain consumer credit products facing payment difficulties during the Covid-19 pandemic.

The proposals include:

• At the end of a payment freeze, firms should contact their customers to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid. 
• Firms should provide anyone requiring further help with support by reducing payments on their credit card and personal loans to a level they can afford for 3 months.
• Support for overdraft customers – allowing customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, to request up to £500 interest-free for a further 3 months. 
• Customers that have not yet had a payment freeze or an arranged interest-free overdraft of up to £500 and experience temporary financial difficulty, due to coronavirus, would be able to request one up until 31 October 2020.

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “The FCA’s proposals are sensible and welcome. These measures have offered much-needed reprieve for those who have struggled to keep financially afloat due to loss of income as a result of sudden illness, being furloughed or being made redundant. But it is important to remember that credit holidays will not constitute free money – you’d need to pay it back – and while they should not have a negative impact on credit files, lenders may still take them into account to assess creditworthiness. 

“There still remains a great deal of uncertainty over coronavirus. Hope for the best but prepare for the worst is a good mentality to have during these uncertain times. Save where you can - having three months’ worth of salary stashed away to ensure you can stay financially afloat in a disaster is a good rule of thumb, but given the ongoing uncertainty over Covid-19,  people might want to aim to double that to six months, if at all possible, but this is easier said than done.”