Coronavirus: City watchdog proposes credit card payment freeze
The UK’s financial watchdog has proposed that banks freeze loan and credit card bills and cancel overdraft interest payments for people hit financially by coronavirus.
The Financial Conduct Authority (FCA) said it will carry out a “brief consultation” on the plans. If accepted, they will come into force on 9 April.
The FCA made a range of proposals it said measures already announced by the government to support mortgage-holders, renters and employees.
It said banks should offer a temporary payment freeze on loans and credit cards for up to three months for struggling customers.
The watchdog also proposed customers with overdrafts should be allowed to use up to £500 with zero interest payments for three months.
The FCA recently overhauled UK overdraft charges, leading many banks to cluster around a 40 per cent rate.
Yet the watchdog today said banks must “make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes came into force”.
The FCA said many Britons are “are facing a financial impact because of the exceptional circumstances arising from coronavirus”.
The organisation’s interim chief executive Christopher Woolard 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.”
The proposals came after the UK’s biggest banks suspended dividend payments and share buybacks on Tuesday after pressure from the UK’s financial watchdogs.
Lenders’ share prices were hit hard yesterday, but banks have acquiesced to strict government proposals throughout the coronavirus pandemic.
Vim Maru, retail director at Lloyds Bank, said: “We welcome today’s guidance from the FCA and we continue to work closely with them through this unprecedented time.” Maru said Lloyds had already taken steps in a similar direction.
Sarah Coles, personal finance analyst, Hargreaves Lansdown, praised the measures. “This will come as a huge relief to so many people who have been wrestling with the challenge of vastly reduced incomes – whilst being dealt repeated blows by debt interest charges,” she said.