The FCA has confirmed it will be introducing the package of measures outlined last week to support consumer credit customers facing payment difficulties due to coronavirus, with changes coming into force on Monday 27 April 2020.

The targeted temporary measures being implemented include a payment freeze on high-cost short term credit, such as payday loans, with no additional interest to be charged.

The regulator will expect firms to provide a one-month payment freeze to customers facing temporary payment difficulties due to the pandemic, suggesting that the shorter period reflects the “much shorter length of most of these loans”, as well as the higher interest rates compared to other high cost credit products.

The FCA also reminded high-cost-short-term-lenders to consider whether “immediate formal forbearance” may be more suitable, if a customer was already in financial difficulty before the impact of coronavirus.

The regulator has also called on car finance, rent-to-own, buy-now-pay-later and pawnbroking companies to offer a three-month payment freeze as part of the measures.

FCA interim chief executive, Christopher Woolard, commented: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”

Commenting on what the move could mean for customers, Hargreaves Lansdown personal finance analyst, Sarah Coles, said: “At the end of the freeze, if they have to ask their lender for more help, it would start to damage their credit record – in the interim, the missed interest payments would have built up even more debt. They’d be far better having those conversations now, and avoiding the extra interest.

“On the flip side, help could be refused to people who could really benefit from it. It’s up to lenders to work out whether it’s in people’s best-interests before they let them have a payment freeze. Unfortunately, in order to speed the process up, they’ll be able to make blanket decisions based on the type of customer you are – rather than your individual circumstances. So even if it’s right for you, you may not be allowed to take advantage.

“The freezes could cause problems for firms too. The FCA recognises they’re having a hard enough time already, and this could make it worse – especially if they can’t access government funding schemes. It is talking to firms about how they are affected, and says any firms already facing insolvency who are worried about the impact should get in touch.”

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