News

UK watchdog allows credit card and loan payment holidays to customers

The Financial Conduct Authority (FCA) has instructed top banks to offer three-month payment holidays on credit cards and loans to customers affected by the COVID-19 epidemic.

Customers at six major banks and building societies can apply for the temporary freeze on repayments if they are in financial stress due to the outbreak. HSBC, Lloyds (LLOY.L), Royal Bank of Scotland (RBS.L), Barclays (BARC.L), Santander (SAN) and Nationwide will also provide arranged overdrafts to the affectees of up to £500 at zero interest rate for three months. According to the regulators, other banks are also under heavy coercion from Britain’s financial watchdogs to comply with the suit by 14 April. Customers’ credit rating will not be affected by temporary measures. 

The FCA urged lenders to make the changes through new regulations on how they meet their regulatory obligations to treat customers in a fair manner. It said it had also relaxed its rules to make it convenient for lenders to provide the support. Further measures are expected soon to ease pressures on customers with car financing offers, while banks have already fallen into pressure to provide mortgage holidays and suspend dividends.

Christopher Woolard, Interim Chief Executive of the FCA, stated: “We know many people are suffering financial pressures brought on as a result of the coronavirus pandemic.” But he advised customers to critically think before using the measures and apply only if they require immediate assistance. Woolard also instructed customers to visit the websites of firms details and if necessary use internet services to request assistance rather than phoning, with call centres under huge stress. He also encouraged phone-users to “be patient” and preferably wait until after the Easter bank holiday weekend.

UK Finance, which represents many banks, said it welcomed the measures after the finance sector held “detailed discussions” with the regulator.