New financial help for individuals impacted by coronavirus
2 April: The Financial Conduct Authority has announced it is consulting on new measures to help consumers avoid financial distress whilst they are unable to work or otherwise impacted by coronavirus.
Whilst it is called a consultation, the tone of the announcement and the four-day deadline to turn around any response makes the FCA’s intent clear. Borrowers and those who find themselves needing to borrow must be helped through the toughest period of the crisis where they may no longer be working but government support measures have yet to kick in.
The FCA has proposed:
- A three-month payment freeze on loans and credit cards
- No interest on the first £500 of an arranged overdraft on a main personal current account for three months
- Individuals should not be adversely affected by the recent changes to overdraft charges
- Anyone using these temporary measures should not have their credit rating affected
As the detail of furlough schemes and self-employed support is worked out, the measures to be consulted on will allow individuals a bit of extra breathing space both in terms of cash flow and worrying about any negative impact on their credit and financial standing in the future. The message is that regulators do not want to see people becoming unnecessarily indebted while waiting for support.
Whilst individuals will have to contact their lender, there is “no expectation” they will be asked for evidence of their coronavirus-related difficulties, which will hopefully mean a smooth process of getting support.
Commenting on the proposals Philippa Kelly, Head of Financial Services at ICAEW, said: “It is helpful that the FCA is encouraging the extension of forbearance across lenders and not just the large banks. The timing of the measure will help people bridge the gap until government support can flow to them
“The proposals don’t apply to motor finance or buy-now-pay-later, and it’s important to remember that a payment holiday will likely mean your debt grows as interest will still be charged,” continued Kelly. “If you can work with your lender to make even smaller payments during this time, it will help.
“It will be important for the FCA to monitor that support is reaching those who need it, and particularly with money for the self-employed being delivered in June at the earliest, it may be helpful to extend certain measures past 90 days.”
For the latest news and guidance on the ongoing impact of COVID-19 for businesses and accountants, visit ICAEW’s dedicated coronavirus hub.