Shearman & Sterling LLP | FinReg | UK Conduct Regulator Consults on COVID-19 Financial Relief for Consumers Guidance
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  • UK Conduct Regulator Consults on COVID-19 Financial Relief for Consumers Guidance

    The U.K. Financial Conduct Authority is consulting on proposed measures to ease the financial implications of COVID-19 on consumers. The measures would be introduced via guidance issued by the FCA on areas of particular concern to consumers. The consultation, which is deliberately short given the unprecedented circumstances arising from the pandemic, is open until 9am on April 6, 2020 and, if confirmed, the measures will take effect from April 9, 2020.

    The proposed guidance covers the following areas:
    • Overdrafts: On request, relevant firms should offer consumers with existing arranged overdrafts 0% interest on amounts up to £500 on their main personal current account for up to three months. Firm should also ensure that, over the next 90 days, consumers are no worse off as a result of the increases some banks have made to arranged overdraft prices, and that they are not paying more than they would have paid under previous prices. The guidance applies to firms with permission to accept deposits and provide current accounts with an overdraft facility and to Primary Personal Current Accounts, as well as to EEA firms who currently passport into the U.K. It does not apply to private banks or credit unions.
    • Credit cards: On request, relevant firms should offer three-month payment freezes for customers facing payment difficulties as a result of coronavirus, or should entitle those customers to pay a nominal payment on credit cards, store cards and catalogue credit and should not suspend customer cards during this period. The guidance applies to regulated firms who issue credit cards to consumers and those that have acquired credit card debts, but not to business credit cards. The FCA is also proposing to amend the Consumer Credit sourcebook of the FCA Handbook to reflect the payment deferral guidance.
    • Personal loans: On request, relevant firms should provide a three-month freeze on personal loans for customers facing payment difficulties due to coronavirus. The guidance applies to regulated firms that issue (or have purchased) personal loans (i.e. regulated credit agreements that are not high-cost short-term credit agreements, buy-now-pay-later agreements, hire purchase agreements, credit cards or overdrafts).
    • Interest payments: firms should provide full forbearance on interest payments where required by a customer; if this is not required, firms are entitled to continue charging a reasonable rate of interest where a customer requests a payment freeze.

    These measures are in addition to, and should not be regarded as a substitute for, the normal forbearance that would be offered to consumers in financial difficulty. Firms are entitled to offer more generous assistance to consumers if they so choose.

    View the FCA's proposed COVID-19 financial relief for consumers guidance

    View the FCA's proposed amendments to the Consumer Credit sourcebook.

    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.

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