The Financial Conduct Authority (FCA) has recently put forward measures to help support people through this tough period. From April 14, all banks and other financial firms will be required to incorporate new rules concerning overdrafts, loans and credit cards.
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For loans and credit cards specifically, firms and lenders will be expected to offer a temporary payment freeze on loans and credit cards for up to three months.
These new freezes are only intended for people who are badly impacted by coronavirus and should not be used lightly.
Christopher Woolard, the interim Chief Executive for the FCA expanded on this as the measures were announced: “We know many people are suffering financial pressures brought on as a result of the coronavirus pandemic.
The measures we’ve announced are designed to provide people affected with short-term financial support through what could be a very difficult time.
“The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.
“Customers should think carefully before making use of these measures and only do so if they need immediate help.
“Where they can still afford to make payments, they should continue to do so.”
While it is regrettable that these actions are needed at all they will undoubtedly help millions across the UK.
ClearsScore, the FinTech company that allows people to monitor their credit score, analysed what these new rules could mean for UK consumers.
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Tom Markham, the company’s credit card and loan expert commented: “The FCA’s announcements are a giant leap forward and will provide welcome relief to consumers at this time of extreme financial pressure.
“According to ClearScore’s data from over 9 million UK consumers, the average loan value in the UK is £10,025 and the outstanding credit card debt value is at £3,070.
“With many people unable to work, servicing these debts is unachievable and would drive them further into debt.”
“In addition, the ability to use up to £500 of arranged overdrafts without paying interest will allow many millions to access emergency funds for some of their most necessary purchases.
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“ClearScore’s own data show that an average of 1.5 million consumers used their overdraft on a monthly basis, and as the Covid-19 crisis evolves, we can only expect that to rise.
“We encourage banks and lenders to make the terms and conditions of payment holidays and unarranged overdraft fees easily understandable to their customers.
“It will also be important to ensure that communications around overdraft fees and payments holidays are as clear as they can possibly be, with arrears letters halted entirely.”
These calls for clear communication are crucial considering that the new measures need to be actioned by firms themselves and not by the state or regulator.
The FCA detailed that consumers should check individual companies’ websites and social media posts for further information or clarity.
They warn that call centres will, understandably, be very busy at the moment and this will likely become worse as these new measures are rolled out.
Thankfully, the regulator detailed that they will keep the guidance under review should anything go wrong and they advise consumers to contact the Money Advice Service for further guidance.
The government website is also being updated very regularly with the latest coronavirus news.
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