Lenders could be urged to offer a temporary freeze on loan and credit card payments, targeted at struggling borrowers affected by the coronavirus and its economic fallout.
The Financial Conduct Authority (FCA) announced on its website on Thursday it is likely to issue new guidance to banks and other lenders to give customers a three-month payment freeze.
A package of measures set out by the regulator include ensuring all overdraft customers are “no worse off” on price compared with before recent overdraft changes came into force.
It may also order companies to charge no interest on existing arranged overdrafts of up to £500 ($620) for up to three months for customers affected financially by the pandemic.
Customers benefiting from such temporary measures would not have their credit rating affected.
The FCA announced a rapid consultation on the proposals, asking stakeholders to reply by Monday. If the plans are then signed off, they would come into effect by 9 April. But the FCA said it may then take a “short period of time” before lenders put the measures in place.
Christopher Woolard, interim chief executive of the FCA, said: “Coronavirus has caused an unprecedented financial shock, with far-reaching consequences for consumers in every corner of the UK.
“If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time.”
The FCA said in a press release the proposals were aimed at ensuring an “expected minimum” of support for consumers who were previously “financially stable.”
Stephen Jones, chief executive of UK Finance, which represents leading banks, said all lenders were ready to support customers and already helping with relief on overdrafts and over unsecured debts.
He said the changes should enable lenders to give customers further support, but cautioned that customers needed to be “able to manage their borrowing” after the crisis.
“It is critical that the FCA’s proposals do not disrupt the provision of credit to borrowers and takes account of the business models of all credit providers including those outside the mainstream market,” he said.
Lloyds Banking Group, which owns Halifax and Bank of Scotland as well as Lloyds, welcomed the proposals.
Its retail director Vim Maru said it had already helped thousands of customers through its temporary support measures. “Customers can apply for payment holidays on mortgages and loans using a new online application that provides a decision in days; this will also be available for credit cards this week.”
Maru said missed payment fees would also be scrapped on mortgages, credit card and loans for three months, and mortgage offers were now valid for an additional three months.
It comes a day after shares in leading UK banks dropped sharply after they gave in to pressure from regulators to also scrap their dividends for the year.
HSBC (HSBA.L), Lloyds (LLOY.L), Barclays (BARC.L), Royal Bank of Scotland (RBS.L), Santander, and Standard Chartered (STAN.L) released separate statements on Wednesday saying they would cancel any outstanding dividend payments.
Several of the announcements from banks referenced formal requests from the Bank of England and the Prudential Regulation Authority (PRA), a division of the central bank that oversees lenders.
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