The Financial Conduct Authority (FCA), the entity that regulates banks in the UK, has said that banks need to take steps to provide financial relief for customers impacted by coronavirus. Here are the most noteworthy changes taking place:
Interest-free overdrafts
Banks are providing customers who are experiencing money struggles as a result of COVID-19 and who already have an arranged overdraft with a £500 interest-free buffer. Standard interest rates will apply to overdrafts above that amount.
Most banks are applying this automatically their Current Account customers with arranged overdrafts, but it's worth checking your bank's website to see if your account is eligible and whether or not the buffer needs to be requested by the account-holder.
Credit card repayment holidays
If you have a student credit card, we advise you to get in touch with your bank if you think you might need a little room for manoeuver over the next few months.
On top of interest-free overdrafts, banks are also offering temporary payment holidays or freezes for customers with credit cards. However, you'll still be charged interest during the repayment holiday, so it may be worth continuing with the payments if possible.
The FCA has said that banks must ensure that customers using any of these temporary measures will not see their credit score negatively affected as a result.
So if you do have to resort to any of these measures, you shouldn't be punished for it further on down the line!
Payment holidays for car finance
If you've just bought a car, help is coming for you too! The FCA has confirmed it's bringing in measures for people who've purchased cars using a car finance plan.
From 27th April, companies will have to offer a three-month payment freeze to customers who are struggling to keep up their payments on their car finance due to coronavirus.
The authority has also said the firms should not take steps to end the agreement or repossess cars if customers aren't able to complete their payments.
More information on this here.
Payment holidays for short-term high-cost credit
The FCA has also said that payday loan customers will also be given a one-month payment freeze if they are unable to complete their payments. No interest will be charged during this time.
When the payment holiday ends, companies should arrange for customers to pay back what they owe in a way that isn't financially detrimental to them, be it in one payment or in several instalments.
Customers using buy-now-pay-later services will also be given a three-month payment freeze. Interest will continue to accrue, however, unless the customer currently benefits from a promotional interest-free or low-interest period.