Credit card firms will be expected to show greater flexibility to customers with persistent debts, the City regulator has said.
The Financial Conduct Authority (FCA) said it is closely monitoring the coronavirus situation, adding: “We expect firms to provide strong support and service to customers during this period.”
It said it welcomes the steps companies have already taken to offer support to customers and to encourage them to contact their bank or lender if they are experiencing financial difficulties.
In an update published on its website, the FCA said: “In the current climate, we want firms to show greater flexibility to customers in persistent credit card debt.”
Under FCA rules, credit companies are required to take a series of escalating steps to help customers who are making low repayments over a long period.
After 36 months of someone being in persistent debt, the provider must offer options to help repay the debt more quickly. If customers do not respond within a period set by the firm, the card must be suspended.
But the regulator said that, given the challenges facing many customers at present, it thinks they should be given more time to respond to firms’ communications.
This means that companies would not be obliged by the FCA’s rules to suspend the cards of non-responders before October 1 2020.
This applies both to customers who have already received communications from their provider and those who are yet to receive them.
The FCA said: “We will be in touch with firms shortly to confirm details of this proposal.”
Many banks and building societies have already offered the possibility of mortgage payment holidays and early access to savings pots currently locked away, for those who find themselves in financial difficulty due to the Covid-19 pandemic.
Nationwide Building Society said on Monday that it plans to trial special opening hours in some branches to help the elderly and vulnerable.
Stephen Jones, chief executive of trade association UK Finance, said: “This latest update provides welcome guidance for firms in addition to the swift and continuous actions already taken by the UK public authorities and the industry during these unprecedented times.
“Banks, building societies and other lenders in the UK are actively preparing for the negative impacts of Covid-19 and focused on supporting their customers over what will be a challenging period for all.”
He continued: “The banking and finance industry will continue to work with the Government and regulators over the coming weeks and months to ensure the industry is fully able to prioritise first and foremost supporting customers to manage their financial needs flexibly and effectively.”