Stop-gap measures to help overdraft and credit card customers
Banks will be expected to offer customers whose finances have been hit by coronavirus an interest-free overdraft buffer of up to £500 for three months, the City regulator has confirmed.
The Financial Conduct Authority (FCA), which had previously consulted on a package of proposals to offer borrowers more stop-gap help, said yesterday it will press ahead with the plans.
It also said that firms should offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by coronavirus.
If someone has a personal loan, credit card, store card or catalogue credit, they can ask for a freeze on repayments for three months. Personal loans also include guarantor loans, logbook loans and home collected credit.
However, interest will continue to build, which could mean paying higher costs in the longer term – so people should only make the request to freeze payments if they need to. If they can afford to keep up repayments, either in full or a smaller sum, then they should do so, the FCA said.
All firms should be ready to receive customer requests by 14 April, although some firms are adopting the changes immediately.
Firms should also ensure consumers using any of these temporary payment freeze measures will not have their credit file affected, the regulator said.
Many providers have already announced £500 zero interest overdraft buffers, but the exact help being offered has varied from bank to bank.
Providers which have already announced temporary £500 zero interest overdraft buffers for agreed overdrafts in recent days include
M&S Bank, HSBC UK, Lloyds Banking Group, TSB and Santander.
Barclays has previously said it will waive overdraft interest from 27 March until the end of April. RBS Group said it will be offering £500 interest-free overdraft buffers and threemonth repayment deferrals on credit cards.
A spokeswoman for the bank said: “We welcome this clarity from the FCA, and are working through their directions.
“We remain committed to supporting our customers through this unprecedented time and we know these regulations will give customers even more peace of mind.”
The FCA said it expects firms to allow customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months.