FCA Confirms Virus Payment Freeze For Loans, Car Finance

By Najiyya Budaly
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Law360, London (April 9, 2020, 2:05 PM BST) -- Banks can introduce payment freezes for customers who are struggling to pay off credit cards and loans during the coronavirus pandemic, the Financial Conduct Authority confirmed Thursday as it said it would extend the financial relief to the motor finance industry shortly.

The FCA has confirmed temporary measures, including relief for the motor finance industry, to help consumers struggling during the crisis. (AP)

The City watchdog confirmed temporary relief measures to help consumers who are struggling to make repayments during the crisis.

The watchdog launched a short consultation last week on the measures, which include freezes on loans and credit cards for up to three months if account holders have fallen ill, been laid off or furloughed.

"The measures we've announced are designed to provide people affected with short-term financial support through what could be a very difficult time," said Christopher Woolard, interim chief executive at the FCA. "The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic."

Woolard said that the regulator would be announcing further measures to support customers in other parts of the credit market. This will include announcing proposals for the motor finance sector next week, he said.

Thursday's measures include allowing consumers to contact their bank to request that zero interest is charged on their arranged overdraft up to £500 ($622) for three months. And lenders will be required to ensure that customers with overdrafts do not pay more interest than they would have paid before.

Lenders must ensure that using the temporary measures will not lower the credit score of consumers, the FCA said.

The rules come into force today but the full range of measures will apply from April 14, the watchdog said. This lag will enable banks to ensure they have enough resources to handle requests from their customers.

The FCA said the steps would not be suitable for those in serious financial difficulties. Borrowers should continue to make repayments if they can afford to do so and the guidance would also not prevent lenders from offering more generous assistance.

The regulator said its relief package would complement measures already announced by the government in March, which include lenders supporting customers through so-called mortgage holidays.

--Editing by Rebecca Flanagan.

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