Financial services regulation and COVID-19 video diaries: Financial relief for consumer borrowers

Hello everybody. Just a short update on the latest package of measure which have just been proposed by the Financial Conduct Authority this morning and which are part of the overall effort to provide a degree of relief to consumers of financial services in the UK who are currently impacted by COVID-19 the current pandemic. These measures are proposed at the moment but they are likely to come into effect on 9 April so in seven days' time, pending any changes following consultation. This is a very short window for consultation and those who wish to provide responses need to do so by 9.00 am this coming Monday morning.

The measures complement those which have been announced by the Bank of England and by the Treasury in recent days and weeks in order to help support the economy to support consumers of financial services at this particularly exceptional time. These measures are being proposed by way of guidance from the Financial Conduct Authority to retail lenders both bank and non-bank lenders, in connection both with credit cards, retail revolving credit and then also to personal loans. There is also guidance proposed for overdraft facilities.

The scope of these measures is intended to provide relief to those consumers who are suffering or who are likely to suffer adverse financial consequences arising from Coronavirus. For retail revolving credit and for credit cards, issued to consumers, the guidance will encourage firms to provide forbearance by way of a payment delay of up to three months, and there are similar guidance measures proposed in connection with personal loans.

For overdraft facilities, the Financial Conduct Authority is again encouraging firms through this guidance to provide a £500 interest-free facility to consumers and to reconsider the nature and scale of the current charging structure which UK banks deploy arising from recent supervisory measures on overdrafts.

These are particularly interesting proposals and will certainly be challenging for a great number of retail financial services firms to operationalise in such a short time scale. There are also some interesting questions around the interaction between this guidance and the application of the Consumer Credit Act 1974 as well as other rules and guidance in the consumer credit sourcebook.

The FCA is encouraging firms to consider higher level principles and rules to which they are subject. Of course principle 6, treating customers fairly is forefront of mind and firms who are operating in this sector with retail clients or consumers as customers will need to consider the application of principle 6 not just to these particular products but also to other products where there are consumer customers. Indeed one of the challenges that firms will face is applying this guidance to other products which aren't necessarily or at least at this stage aren't clearly in the scope of these measures in order to ensure there is a consistency approach across a product suite.

This is the latest in a series of communications from this regulator and also from the PRA which is really encouraging firms to think more holistically about the way in which these high level rules and principles apply to their businesses and to ensure that in particular lessons from the global financial crisis have been learned and that these institutions, our clients do as much as they possibly can to support their customers.

As I mentioned at the start, these measures are designed or intended to come into force this time next week and clients, firms who wish to provide a response should do so by Monday.