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The Financial Conduct Authority (FCA) has instructed banks to offer £500 interest-free overdrafts to clients who’ve been hit financially throughout the coronavirus crisis. The temporary measures would observe repayments on credit cards and loans ceased for up to three months.
Firms might also be asked to consider other strategies to help borrowers, like reductions in monthly payments. Interest will nevertheless be charged on accounts provided for clients can afford it. The new measures are brought in after criticism that banks are not doing enough to assist small companies and members of the public.
Yesterday, banks were warned by Business Secretary Alok Sharma they had to step up and help bail out small companies – over a decade after they had been saved during the financial crisis.
Give 0 per cent overdrafts for up to three months for up to £500. Three month repayment freeze or reduction on credit cards, store cards and catalogue credit customers can ask for a three-month payment suspension on loans interest will still be billed on debt, if a customer Can’t pay it the FCA also verified that credit scores wouldn’t be affected and credit cards can’t be suspended on account of the new rules.
It is going to be up to lenders and banks to choose who gets the further support. The package would be on top of measures already announced by the government to assist families, including rent and mortgage payment holidays.
But the three-month payment freeze on loans doesn’t extend to high-cost credit loans, such as payday loans, guarantor loans, and doorstep loans. Here, you’ll still need to contact your lender directly to see how it can help.
Christopher Woolard, interim chief executive of the FCA, stated: “Coronavirus has generated an unprecedented fiscal jolt with far-reaching consequences for customers in every corner of the United Kingdom.
“If confirmed, this package of measures we’re proposing today will help provide consumers that are affected with the temporary financial aid they need to help them weather the storm in this tough time.
The FCA says customers shouldn’t contact their lender or bank about the extra help until it’s been confirmed. It expects to make a further statement next week. Where customers can still manage to make payments, they ought to keep doing so, the FCA states.
Martin Lewis, the founder of MoneySavingExpert.com, stated: “This is just another, significant, welcome, yet unprecedented coronavirus-driven market intervention — this time from the ruler.”It is important to not forget all this is a consultation, done urgently, finishing next Monday with modifications enacted on Thursday.
Having said this, my suspicion is that the consultation is simply a formality, following the procedure, and this will be put in place relatively unchanged. Under previous changes already announced by the FCA, banks are also prohibited from charging unarranged overdraft fees from April 6, even though they can still charge interest prices.
Credit card users who only make minimum payments each month are also being given more time to escape from persistent debt following the FCA suspended new rules which were due to come into force last month. This action is currently being pushed back until October.
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