FCA unveils plans to support consumer credit and overdraft customers

The regulator shares proposals designed to ensure firms support UK consumers facing payment difficulties.

The 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 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.

If these measures are confirmed, the FCA would expect that firms:

• Recognise the uncertainties and challenges that many customers will face in the coming months and provide tailored support which reflects their individual 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 their customers to minimise stress and anxiety experienced by customers in financial difficulty.
• Put in place sustainable repayment arrangements which are affordable and take account of their customers wider financial situation including their other debts and essential living expenses.
• Give customers time and opportunity to repay and do 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 to make that happen.
• Recognise and respond to the needs of vulnerable customers.

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “The harsh reality is many UK consumers could find themselves teetering on financial cliff edge come the start of November. A lot has been said about the likely wave of unemployment once the Government’s furlough scheme finishes on 31 October, and the FCA’s current guidance to providers of consumer credit and overdraft products to support those facing payment difficulties is due to expire on the same date.

“The Covid-19 financial support measures were only meant to be temporary. There is no silver bullet solution, but a carefully applied weaning off process is now in order as not to pull the rug out from under the feet of those who have found themselves in a financially precarious position because of the virus.

“While the UK is seemingly open for business, it is impossible to predict the end to the coronavirus disruption, so it is important to pay closer attention to your finances. Consumers should remember that payment holidays will not constitute free money – you’d need to pay it back.

“Hope for the best but prepare for the worst is a good mentality to have during these uncertain times. A good rule of thumb is to have three months’ worth of salary stashed away to ensure you can stay financially afloat in a disaster – although you might want to aim to double that to six months, if at all possible, but this is easier said than done.”