Coronavirus: Emergency credit card, loan, and overdraft relief to be extended

·Senior City Correspondent, Yahoo Finance UK
Payment holidays and interest-free overdraft buffers are to be extended for another three months. (PA)
Payment holidays and interest-free overdraft buffers are to be extended for another three months. (PA)

The UK’s top financial watchdog is pushing to extend credit card, loan, and overdraft relief for banking customers hit by the coronavirus pandemic.

The Financial Conduct Authority (FCA) said on Friday it wants banks and credit card providers to offer payment holidays and interest free overdrafts of up to £500 ($611) for another three months. It would mean customers could apply for special COVID-19 relief up until 31 October.

“We have been working closely with other authorities, lenders and debt charities to support consumers in the current emergency,” interim FCA chief Chris Woolard said in a statement.

“The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus. Where consumers can afford to make payments, it is in their best long-term interest to do so, but for those who need help, it will be there.”

The FCA first put in place temporary measures in April to help support customers through the COVID-19 crisis.

Industry lobby UK Finance said banks and lenders had provided 1.5 million payment holidays on credit cards and loans.

“The banking and finance industry has a clear plan to help the country through these tough times and is committed to providing ongoing support to those customers who need it,” Eric Leenders, UK Finance’s managing director for personal finance, said in a statement emailed to press.

Read more: Calls for interest rate cap for banks

Earlier this month the Fairbanking Foundation called on the regulator to extend relief measures.

The FCA’s proposals do not go quite as far as the foundation’s suggestions. The Fairbanking Foundation called for a cap on overdraft interest rates beyond the £500 buffer. Many banks were due to raise interest rates close to 40% prior to the pandemic.

The FCA said on Friday banks should ensure customers are “no worse off” than they were prior to recent overdraft rule changes but stopped short of a cap. The regulator said it would “continue to monitor overdraft pricing.”

The watchdog is seeking input from banks and lenders on its proposals for an extension. Rules will be finalised by Monday (22 June).