Britain's FCA proposes temporary financial relief for customers

The FCA detailed that they are still consulting on the proposed measures but they urge all stakeholders involved to respond asap, with the aim of enforcing new actions by 9 April.

The City watchdog also wants interest on the first £500 of existing overdrafts to be frozen for a period.

The regulator said that while, overall, this will significantly reduce the cost of unarranged borrowing, some firms have recently made a decision to increase their arranged overdraft prices.

Customers benefiting from such temporary measures would not have their credit rating affected.

"Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK", Christopher Woolard, interim chief executive of the FCA, said.

The FCA, which supervises banks and credit providers across the United Kingdom, also said consumers using any of the temporary measures should not see their credit rating affected.

The FCA said in a press release the proposals were aimed at ensuring an "expected minimum" of support for consumers who were previously "financially stable". They are not a substitute for our normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty. But the FCA said it may then take a "short period of time" before lenders put the measures in place.

The FCA said it will make a further, unspecified, announcement next week on its measures.

The guidance would not prevent companies from offering more generous assistance to their customers, and some already are, Woolard said.

Customers without arranged overdrafts on their main current account will be able to ask for one in line with the proposals, the FCA said.

For context, these inflated interest rates include Nationwide replacing a daily fee of 50p for arranged overdrafts with an interest rate of 39.9 per cent, HSBC's interest rate doubling from 19.9 to 39.9 per cent and many other big names (Santander, Lloyds and NatWest) raising interest rates to almost 40 per cent. Under the FCA's rules over 7/10 consumers will be better off or no worse off.

Customers facing financial challenges due to coronavirus would be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit.

The FCA has wanted to deal with the urgent issues first like loans and credit cards as any action on vehicle financing would need tailored solutions that take more time to work out due to specific features like "balloon payments".

"In a nutshell, in the motor finance sector, what it means is keeping customers in their cars is what's needed".

Banks have been ordered to offer £500 interest-free overdrafts for customers who are struggling.