FCA Says Lenders Must Consider Cancelling Customers’ Interest, Fees

The Financial Conduct Authority (FCA) has announced new guidance that establishes firms must continue to administer support to anyone who is struggling to make payments due to COVID-19-related challenges. 

Additional financial help for credit and overdraft service users will persist when the FCA’s guidance continues where it left off, according to the Manchester Evening News.

The last guidance was set to end on 31 October, but the financial support measures such as payment holidays or interest-free overdrafts will continue from 1 November onward. After an additional six months in use, the regulator will review the guidance.

The FCA wants consumers who are facing financial struggles due to losses to not have to worry about credit card, overdraft or loan debts growing as the coronavirus pandemic perseveres.

Financial institutions are required to consider payment holidays for customers who cannot make payments, or reduce their financial burden by offering a service like interest-free overdrafts, according to the FCA’s guidance.

Firms are asked to tailor payment schedules to each person who seeks an arrangement because everybody’s situation is different.

The FCA is expecting financial firms to recognise and comply with the following: 

• Understand that many consumers are facing tremendous uncertainties and more could be struggling in the coming months;
• When consumers are coming to the end of their payment holidays, they will need assistance so they do not miss payments if they are unable to resume paying; 
• Firms must be flexible and options should be readily available; 
• Consumers must have ample time and opportunity to pay and should not be pressured to repay debt quickly if they cannot;
• Repayment arrangements need to be reasonable so customers can also pay their other essential living expenses;  
• Interest-free overdrafts and other reduction strategies should be used to keep debts from expanding;
• Overdraft customers who have used assistance such as interest-free overdrafts should be notified to see if they need further financial assistance;
• Whenever possible, interest should be reduced or waived;
• Treat valuable consumers with care and consideration during this challenging time.

The FCA has maintained the same recommendation throughout the pandemic, saying if you can pick up where you left off with making payments, it is best to do so. But, if you are continuing to struggle financially, or your financial troubles began recently, firms are expected to custom-make a payment arrangement you can tackle. 

The guidance covers consumers who have credit cards or store charge cards, personal or car loans, overdrafts, rent-to-own and buy-now-pay-later services.

Consumers should also be aware that any assistance given will now be reflected on credit reports. 

“Where consumers require further support from firms, either at the end of payment deferrals under the guidance, or where they need support for the first time, this will be reflected on credit files in accordance with normal reporting processes,” the FCA wrote. “This will help ensure lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms should be clear about the credit file implications of any forms of support offered to consumers.”

A survey of more than 2,000 people in the U.K. shows that over 40% of people are relying on credit and loans just to get by, according to Yahoo Finance.

“If people are still struggling with their finances at the end of payment holidays, they shouldn’t suffer in silence,” Valentine Mulholland of the Money and Pensions Service said, according to Yahoo Finance. “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.”

What is your opinion on the FCA’s extended guidance? Share how you feel in the comments.

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