Law360, London (April 2, 2020, 10:21 AM BST) -- British lenders should freeze loan and credit card payments for borrowers struggling with the "financial shock" caused by the coronavirus outbreak, the Financial Conduct Authority said Thursday, as it set out a proposed three-month relief package for consumers.
The FCA said it will expect banks to offer payment freezes on loans and credit cards as it gets to grips with the damage done by the coronavirus crisis. (AP)
The move will provide temporary relief for bank customers who have fallen ill, been laid off or furloughed during the global pandemic and are struggling to make repayments. The regulator said it is consulting on the measures and plans to put them in place by April 9.
"Coronavirus has caused an unprecedented financial shock, with far-reaching consequences for consumers in every corner of the U.K.," Christopher Woolard, interim chief executive at the FCA, said. "If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time."
Consumers can also contact their bank to request that zero interest is charged on their arranged overdraft up to £500 ($620) for three months under the watchdog's proposed measures. And lenders will be required to ensure that customers with overdrafts do not pay more interest than they would have paid before.
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. The guidance would also not prevent lenders from offering more generous assistance to their customers some already have, the watchdog added.
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.
Mortgage lenders agreed they will support customers who are experiencing problems with their finances as a result of COVID-19 after Chancellor of the Exchequer Rishi Sunak announced the stopgap as part of an "unprecedented package" of government-backed loans worth £330 billion.
Lenders owned by the Lloyds Banking Group and the Royal Bank of Scotland have all confirmed they will offer to defer mortgage payments from borrowers affected by the virus outbreak.
--Additional reporting by Joanne Faulkner. Editing by Ed Harris.
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