FCA ‘right to step in’ on consumer credit – but measures must cover all forms of borrowing

The Money Advice Trust, the charity that runs National Debtline and Business Debtline, has welcomed today’s announcement from the Financial Conduct Authority of proposed measures to support consumer credit customers through the impact of the Covid-19 outbreak.

The FCA’s proposals are to:

  • Set out the FCA’s expectations on firms to offer a temporary payment freeze on loans and credit cards where consumers face difficulties with their finances as a result of coronavirus, for up to three months.
  • Ensure that for customers who have been hit financially by the coronavirus and already have an arranged overdraft on their main personal current account, up to £500 will be charged at zero interest for up to three months.
  • Require firms to make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes came into force.
  • Ensure consumers using any of these temporary measures should not have their credit rating affected because of this.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “The financial shock to households that the Coronavirus outbreak has caused is like nothing we have seen before – and the FCA is right to step in to ensure payment freezes on loans and credit cards where customers are struggling.

“We need to know more, however, about what the regulator intends to do on other types of borrowing like car finance, guarantor loans and other high cost short term credit products. For forbearance to work, it has to cover all forms of borrowing, to help people through this difficult period.

“Some firms have been ahead of the regulator in offering targeted forbearance for consumer credit customers affected by Covid-19 – but it’s important that all firms offer the same support. The FCA should also be prepared to extend these measures beyond three months if needed.”

National Debtline has published a Coronavirus factsheet for people whose finances have been impacted by Covid-19, available at www.nationaldebtline.org/factsheet

The Money Advice Trust is continuing to engage the Government on the need to support household and small business finances through the Coronavirus crisis, following the publication of the Money Advice Trust and StepChange Debt Charity’s proposed ‘Rescue Package’ recommendations last week.