It’s great news for those facing financial hardship as a result of the Coronavirus that the regulator has stepped in to try to stop people getting into perpetual debt as a result of the high interest charges on loans and overdrafts.
The regulator’s move means that anyone is entitled to a £500 interest-free overdraft if their finances have been affected by the current crisis, which at the new interest rates of 40% will save some customers from seeing their interest charges rack up at a time when they can’t afford to repay the debt. What’s more, the FCA wants to ensure that no one is disadvantaged by the changes to overdraft interest rates that it has brought in, and banks must now ensure that no one is paying more than under the previous scheme. Those with loans, credit cards and store cards will also be able to get a three-month payment holiday on their debt, to help them get through the toughest months of the crisis.
Some banks had taken similar steps already, but clearly the regulator felt the industry wasn’t moving fast enough to help customers who are facing real financial problems right now. The FCA is keen to point out that banks who were already offering more generous measures than this shouldn’t pull-back on their offerings now, but instead see these new rules as the minimum level of help to be offered.
The rules will be brought in next week, after a very short consultation period, so savers will have to wait until next week before they can approach their bank to make use of the measures – assuming their banks aren’t already offering them.
All the measures are announced for an initial three-month period, but we’d hope to see this extended if the crisis carries on longer. The last thing people who are still out of work and unable to look for new jobs need is to be hit with interest payments before they have had a chance to get back on their feet.
These articles are for information purposes only and are not a personal recommendation or advice.
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