Customers who rely on overdrafts, credit cards and personal loans can now request a £500 three-month interest-free buffer if their finances have been hit by coronavirus.
The Financial Conduct Authority (FCA) today (July 1) announced customers who have been negatively affected by coronavirus and who already have an arranged overdraft on their main personal current account, can request up to £500 interest-free for a further three months.
The FCA also said firms should also provide these customers with further support where it is needed, including reducing the cost of borrowing above the interest-free buffer, especially if this cost of borrowing would otherwise increase.
Customers who have not yet had a payment freeze or an arranged interest-free overdraft of up to £500 and experience temporary financial difficulty due to coronavirus would be able to request one up until October 31.
It follows a similar scheme for car finance customers introduced earlier this year.
Customers paying for their car through finance and who entered financial difficulty because of the coronavirus were offered a three-month ‘payment holiday’.
But the FCA revealed this scheme will not be rolled out to car finance customers.
It said today’s announcement does not apply to other consumer credit products, such as motor finance, high-cost short-term credit, rent-to-own, pawnbroking and buy-now pay-later, which are covered by separate guidance that will be ‘updated soon’.
There will be undoubtedly be pressure to introduce financial help to customers of motor finance, though.
According to figures from the Finance & Leasing Association, some 425,000 car owners asked their finance company for assistance in the six weeks to April 17.
With an estimated 6.5m new and used cars bought on finance, there will fresh calls on helping these customers as well.
The FCA also confirmed further support for credit card, store card and personal loan customers.
Customers yet to request a payment freeze will have until October 31 to apply for one.
For customers still facing temporary payment difficulties as a result of coronavirus, firms will provide them with support, which could include freezing or reducing payments on their credit card and personal loans to a level they can afford for three months.
Christopher Woolard, interim chief executive at the FCA, said: ‘Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic. For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.’
The new guidance comes into force on July 3.
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