Three reflections on the FCA’s coronavirus support measures
9 April 2020
Many people are struggling with both their mental and financial health during the unprecedented coronavirus pandemic, and it’s vital that consumers are protected through the crisis. The Financial Conduct Authority (FCA), which regulates financial services, has today announced a series of temporary measures to ease the financial burden on people using common consumer credit products during the outbreak. With our most recent survey showing that 56% of individuals with mental health problems are worried about creditors chasing them for money, it is essential that firms and regulators take action to help consumers, when so many are in financial difficulty.
“My income has ceased, I expect this to be the case for some months. I am extremely worried about my mortgage, utilities, loans etc and don’t know what to do about it.”
We welcome the FCA’s new measures, which include a three month payment freeze on credit cards and loans for customers negatively impacted by the coronavirus, as well as limits on the level of interest people can be charged on overdrafts. However, despite the FCA’s quick action, we think that there are some areas where they could go further to protect vulnerable consumers during a time of enormous turmoil. Here are some of the areas that the FCA should focus on next:
1. Extending the payment freeze to other types of credit
The FCA’s new payment freeze covers many commonly used credit products such as loans and credit cards, but other types of credit have been left out. We think that it should extend its guidance to include all consumer credit products, including car-finance, high-cost credit products and buy now, pay later credit. Many of these finance options are often used by low-income consumers who are likely to already be facing financial uncertainty.
“I’m being chased by credit card holders, when currently all my finances are concentrated to get me through this extremely tough time.”
The FCA is considering measures to support customers with other credit products in the coming weeks, and we hope it will extend protections to all customers who are struggling with payments at this difficult time.
2. Clarifying what ’fair pricing’ really means
The FCA guidance sets out what it means for firms to “treat customers fairly” during the coronavirus outbreak. While this guidance is welcome, we believe that it is not clear enough about what “fair pricing” really means at this time.
For example, the FCA has highlighted that firms often offer high-interest credit cards to consumers with low-incomes or poor credit ratings, but it has not made it explicitly clear that this will not be considered ‘fair’ under their new guidance. By setting out clear frameworks on what fair practices entail, the FCA could help protect consumers from unscrupulous practices before they occur.
3. Going further to protect vulnerable consumers
While these are challenging times for everyone, they are particularly difficult for consumers who are in vulnerable situations. It’s therefore crucial that the FCA takes steps to ensure that people in this position benefit from the new measures announced today.
While the FCA’s guidance is extremely welcome, it is essential that consumers also understand their rights and how this new support might affect them. Many consumers struggle to access information on the internet and have preferred methods of communications. It is crucial that firms are proactive in reaching out to customers to clearly outline what this new support means for them.
“It’s a living hell, trying to navigate through pages online or multiple phone options, only to be redirected to a different number or page.”
The FCA’s current guidance encourages firms to offer support if they think a customer is at-risk. However, this requires vulnerable consumers to get in touch and disclose information, something which many consumers may feel unable to do. We think that the FCA should instead put the onus on firms to proactively reach out to vulnerable customers and offer them support. In particular, we’d like to see the FCA encourage firms to use data to identify at-risk consumers in a targeted way. This would make a big difference in ensuring all consumers are supported during this trying time.