FCA confirms measures for consumer credit and overdrafts

The new guidance covers credit cards, store cards, catalogue credit, personal loans, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products and overdrafts. It takes effect from October 2.

The measures apply to consumers who have benefited from support under the current guidance and continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends on October 31. The FCA said firms will be expected to “be clear about the credit file implications of any forms of support offered to consumers”.

Christopher Woolard, interim chief executive at the FCA, said: “For those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local or national responses to the crisis. There should be no ‘one size fits all’ approach taken by firms to help consumers get back on track.”

Among the FCA’s expectations, which include responding to vulnerability, is for firms to:

• Recognise uncertainties and challenges that many customers will face in the coming months as the crisis develops, and provide tailored support which reflects their individual circumstances.

• Work with customers approaching the end of a payment deferral to provide support before they miss payments.

• Give customers time and opportunity to repay and not to pressurise them.

• Put in place sustainable repayment arrangements which are affordable and take account of customers’ other debts and essential living expenses.

• Prevent customers’ balances from escalating once they have put in place a repayment arrangement by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.

The FCA has also confirmed it expects firms to contact overdraft customers who have received temporary support to determine if they still need help.

Where a customer needs further support or where a newly affected customer gets in touch asking for help, the FCA said firms should provide tailored support such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt.

Where consumers require further support from firms, either at the end of payment deferrals under the guidance, or where they need support for the first time, the FCA said this will be reflected on credit files as per normal reporting processes.

The regulator said this will help ensure lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending.

The FCA will review this guidance within six months of it taking effect.