Banks and credit card companies could be issued with new rules to stop people spiralling into debt because of the coronavirus crisis.
The rules would change what they can charge you for loans, credit card debt and overdrafts, according to the Financial Conduct Authority.
Banks have already been told they cannot increase anyone’s overdraft costs during the pandemic, reports The Mirror.
The new rules would also mean your credit rating is not impacted if you go into debt.
The FCA is planning to ban interest on loans and credit card debts and tell banks to give overdrafts free up to £500 for those struggling because of Covid-19.
Banks have until 9am on Monday, April 6, to respond to the city regulator before it makes them official. The new rules are set to come into force on April 9, a week from today.
FCA interim chief executive Christopher Woolard said: “Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK.
“If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time.”
The FCA said that consumers hit by coronavirus using any of these measures would not have their credit rating affected by them.
It added that these extra measures did not let banks off from following its existing rules for dealing with people struggling financially.
“They are not a substitute for our normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty,” the regulator said.
Some banks have already gone further – with Barclays already saying it will waive all interest on overdrafts for a set period in response to the pandemic.
“This guidance would not prevent firms from offering more generous assistance to their customers, and some already are,” the FCA said.
Nor do they give people free rein to just not pay bills if they are still able to do so.
“Where consumers can still afford to make payments, they should as normal and this is likely to be in their best long-term interest to continue to do so,” the FCA said.
The regulator added that banks won’t have to bring these news measures in until April 9.
Overdrafts: Consumers struggling will be able to request up to £500 is provided at 0% for up to three months on their main account. Customers without an overdraft will also be able to request this facility.
Fees and charges are also banned for everyone from April 6, replaced with a single interest rate. Banks have to ensure any new rates don’t leave anyone paying more than they would have paid under previous prices for at least 90 days.
Credit cards, store cards and catalogue credit: Customers struggling will be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit. Firms can consider other measures, such as reductions in monthly payments, if appropriate. Customer cards would not be suspended during this period.
Personal loans: Customers with personal loans who face difficulties with their finances as a result of coronavirus would also be able to ask for a three-month freeze if needed.
Treatment of interest: With the exception of the £500 overdraft proposal, firms would be entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. In the event that a customer requires full forbearance that interest should be waived.