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Credit card repayments and other debt obligations received support from the FCA in recent months as the regulator unveiled plans for payment freezes and other easing measures. In July, it was confirmed these measures would be extended to October 31 and today, the FCA has confirmed consumers in these fields will continue to receive support beyond this deadline.
Christopher Woolard, the interim Chief Executive at the FCA, commented on the new set of proposals: “For those who can restart payments, it is in their best interests to do so.
“However, for those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local or national responses to the crisis.
“There should be no ‘one size fits all’ approach taken by firms to help consumers get back on track.”
The new guidance solely focuses on what financial firms should do moving forward, which will have repercussions for underlying consumers.
The FCA expects firms to:
- Recognise the uncertainties and challenges that many customers will face in the coming months as the crisis develops, 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 and minimise stress and anxiety experienced by customers in financial difficulty.
- Give customers time and opportunity to repay and do not pressurise them into repaying their debt within an unreasonably short period of time.
- 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.
- Prevent customers’ balances from escalating once they have put in place a repayment arrangement 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.
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On top of this, the FCA has confirmed it expects firms to contact overdraft customers who had received temporary support to determine if they still require assistance.
Where a customer needs further support or where a newly affected customer gets in touch asking for help, firms should provide tailored support such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt
The regulator has assured it will monitor firms carefully to ensure customers are treated fairly.
However, it should be noted that where customers require further support from firms, it will be reflected on credit files in accordance with normal processes.
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The new guidance will come into force from October 2 and will be kept under review should any additional changes need to be made.
Valentine Mulholland, a Senior Policy and Propositions Manager at the Money and Pensions Service, responded to the FCA’s announcement: “The measures confirmed today will be helpful for people with credit or overdraft commitments who continue to face financial difficulty after the end of October.
“If people are still struggling with their finances at the end of payment holidays, they shouldn’t suffer in silence.
“It’s crucial they contact the firm to find out what support they can offer, and be aware they don’t have to agree to a repayment arrangement if they cannot afford it.
“Anyone who is worried about money in the wake of Covid-19 can also use the Money Navigator Tool on the Money Advice Service website to find a way forward with their finances.”
Specifically, this new guidance will cover users of the following financial products:
- credit cards
- revolving credit (store card and catalogue credit)
- personal loans
- motor finance
- buy-now pay-later (BNPL)
- rent-to-own (RTO)
- pawnbroking and high-cost short-term credit (HCSTC) products and overdrafts.
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