Financial watchdog proposes interest-free overdrafts and a freeze on loan repayments
The Financial Conduct Authority (FCA) has made a number of emergency proposals in order to assist those that are suffering financially from the Coronavirus crisis. It has asked banks to respond by 6th April 2020 in a bid to get the proposals approved and in force for the 9th April.
What are the new proposals by the FCA?
Banks are being requested to consider offering the following:
- Zero-interest on up to £500 of arranged overdraft for those that are affected by Coronavirus
- 3 month freeze on loan repayments
- Temporary freeze on credit card and store card debt (for up to 3 months)
- Nobody with an overdraft should be worse off after the new overdraft rules come into effect on 6th April 2020 (than they would have been under the current rules). This effectively means banks will have to cut the rate on arranged overdrafts.
- Anyone taking advantage of any of these proposals should not see an adverse effect on their credit record
- No cards should be suspended throughout this time
FCA interim chief executive Christopher Woolard said "If confirmed, the 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."
What other financial help is available for those struggling financially because of COVID-19?
Those with mortgages can apply for a 3 month mortgage holiday (find out how you can take a mortgage holiday in our article) and the government has come up with a number of emergency packages designed to help those most in need. These include:
- Statutory sick pay from day 1 for all workers told to self-isolate even if showing no symptoms of Covid-19
- Coronavirus Job Retention Scheme. Any employer in the country – small or large, charitable or non-profit - will be eligible for the scheme. It will provide government grants to cover 80% of the salary of retained workers up to a total of £2,500 a month. Can be backdated to 1st March 2020
- Almost £1bn of support being provided for renters by increasing housing benefit and Universal Credit. This should mean that Local Housing Allowance will cover at least 30% of market rents in most areas
- Self-Employed Income Support Scheme, with those eligible receiving a cash grant worth 80% of their average monthly trading profit over the last three years (up to a maximum of £2,500 per month, paid for at least 3 months)
Check out our article 'Managing your money during a pandemic - A helpful guide' for more information.
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