The Financial Conduct Authority (FCA) has proposed allowing consumers to extend a payment freeze on their credit cards by a further three months to support borrowers struggling financially amid the coronavirus pandemic.
Under the proposals from the markets watchdog, those who have not yet asked for a payment freeze on credit cards or for an interest-free overdraft of up to £500 could request one up until the end of October.
The extension to the payment holiday, which was introduced in April, would also enable customers to ask for a reduced interest rate on any overdraft borrowing above £500.
“The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus,” said FCA interim chief executive Christopher Woolard.
“Where consumers can afford to make payments, it is in their best long-term interest to do so, but for those who need help, it will be there.”
Once a payments freeze comes to an end, firms should contact customers to find out if they are able to resume payments, and if so agree a plan on how the missed payments can be repaid, the FCA said.
Banking industry body UK Finance welcomed the watchdog’s proposals and said it would work closely with the FCA to finalise the guidance.
“The banking and finance industry has a clear plan to help the country through these tough times and is committed to providing ongoing support to those customers who need it,” said UK Finance managing director Eric Leenders.
He added that the industry was looking forward to the guidance “being finalised swiftly to ensure both borrowers and lenders can plan ahead to ensure customers can have some peace of mind regarding the consequences of Covid-19 on their money”.
The FCA is inviting responses to its proposals until 5pm on 22 June, and expects to finalise its guidance shortly afterwards.
The regulator said it would update its guidance on other forms of borrowing including motor finance, payday loans and pawnbroking soon.