Britain’s banks are asking regulators to relax the rules on credit card repayments as part of a series of measures to help customers cope during the coronavirus crisis.
Lenders are hoping to reach an arrangement where repayment of credit card bills could be postponed for up to three months and have asked the Financial Conduct Authority to waive the current regulatory requirement that customers make a minimum repayment each month.
Credit card issuers could still charge interest and fees during any such payment “holiday” and the total debt would ultimately still have to be repaid. But they have said they will not treat anyone as having missed payments, to ensure customer credit ratings are not affected.
The FCA declined to comment. But one person with knowledge of the regulator’s discussions told the FT: “This is unprecedented and presents difficult challenges . . . Credit card holidays may not be the answer if it means rolling up debt. We are looking at unsecured lending, but at solutions that will work and ensure people don’t end up in more debt.”
There are also logistical challenges to deferring payments. Bank call centres are already very busy because of measures that have already been announced such as three-month mortgage payment holidays.
Further measures will be discussed by video link on Monday between the chief executives of eight banks and FCA interim chief executive Chris Woolard. The banks will be asked how they are coping with the economic crisis created by the pandemic and what more can be done to help customers.
Banks have already raised the limits for cash withdrawals and contactless payments and will be administering the government’s coronavirus business interruption scheme that will provide support for smaller companies.
Further measures to reduce overdraft costs are expected from banks this week.
Before the crisis erupted, banks had announced big increases in interest rates for overdrafts in response to rules that banned them from charging more for unarranged than arranged overdrafts. Charges for arranged overdrafts were due to rise to around 40 per cent at a majority of banks.
Several banks have now announced some sort of relief for overdraft customers. Others will unveil measures next week. On Friday, Metro Bank said current account holders would not be charged any interest for using an overdraft between March 1 and June 30.
Barclays said it would not charge interest to customers with arranged overdrafts between March 27 and April 30, while Lloyds said it would let all customers borrower £300 interest-free until July and RBS said it would freeze interest rates at their current level and waive additional fees.
The cross-party Fair Business Banking group of MPs said on Friday: “In these uncertain times, many businesses and families will use their overdraft facilities to try to get through this crisis and banks should not profit from the financial hardship that ensues.”
The group, led by Conservative MP Kevin Hollinrake, also called again for the FCA to rethink its overdraft reforms, which it said “has exposed many responsible borrowers to punitive interest rates”.