Banks Must Offer first £500 0% Overdrafts and credit card repayment freeze

68
Posted 2nd Apr
Update 1
From 9th April until 9th July 2020, the first £500 of arranged overdraft will be interest free. If your arranged overdraft is lower than this amount, all of it will be interest free. This is being rolled out across various banks including Lloyds, Bank of Scotland, Halifax, HSBC and Santander. First Direct are looking to bring this change within the next week. Worth checking with your provider for any changes if you need support.
Just seen on the news that the FCA have told the banks that they must offer the first £500 at 0% on overdrafts to help people out with their finances at this difficult time for some.
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The measures are designed to provide a short-term stop-gap, for a period of up to three months, to give people who until now have been financially stable some much-needed support.

Banks have until 9am on Monday, April 6, to respond to the city regulator before it makes them official. The new rules are set to come into force on April 9th, a week from today.

FCA interim chief executive Christopher Woolard said: "Coronavirus has caused an unprecedented financial shock with far-reaching consequences for consumers in every corner of the UK.

"If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm during this challenging time."


The FCA said that consumers hit by coronavirus using any of these measures would not have their credit rating affected by them.

It added that these extra measures did not let banks off from following its existing rules for dealing with people struggling financially.

"They are not a substitute for our normal forbearance where that would be more suitable for a consumer in serious and immediate financial difficulty," the regulator said.

Some banks have already gone further - with Barclays already saying it will waive all interest on overdrafts for a set period in response to the pandemic.

"This guidance would not prevent firms from offering more generous assistance to their customers, and some already are," the FCA said.

Nor do they give people free rein to just not pay bills if they are still able to do so.


"Where consumers can still afford to make payments, they should as normal and this is likely to be in their best long-term interest to continue to do so," the FCA said.

The regulator added that banks won't have to bring these news measures in until April 9.




Credit cards, store cards and catalogue credit: Customers struggling will be able to ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit. Firms can consider other measures, such as reductions in monthly payments, if appropriate. Customer cards would not be suspended during this period.

Personal loans: Customers with personal loans who face difficulties with their finances as a result of coronavirus would also be able to ask for a three-month freeze if needed.

Treatment of interest: With the exception of the £500 overdraft proposal, firms would be entitled to charge a reasonable rate of interest where a customer requests a temporary payment freeze. In the event that a customer requires full forbearance that interest should be waived.


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The banks in the UK seem to have given authority to behave like financial thugs in recent years. Their treatment of small business during this current crisis is criminal. Will they listen to the FCA to support ordinary people in their day to day struggle ...I doubt it
The banks owe us.
YukonCashmere02/04/2020 09:40

Would a payment freeze be detrimental to one's credit rating?


No, they've said it will have no affect on credit rating.

qazim02/04/2020 09:32

So it’s the law? What if someone has bad credit CCjs surly this is u …So it’s the law? What if someone has bad credit CCjs surly this is unethical?


What does it have to do with CCJ? It's a temporary payment freeze on loans and credit cards for 3 months to give people some relief during the current situation, no different to the mortgage holidays.
Edited by: "LGB87" 2nd Apr
speric0702/04/2020 09:48

According to MSE pausing mortgage payments would be. Logically, when you …According to MSE pausing mortgage payments would be. Logically, when you look at your credit report you can see repayment history. It will be easy to spot the people who have needed the payment break and they would naturally become higher risk. Also it would be easy to see who has been using an overdraft over the same period. It is good what is being offered / forced upon the banks. However, it should be taken as a last resort in my opinion, but not something everyone should use if they have funds / security to pay. There is no such thing as a free lunch. Its an unprecedented period for all of us, but I really can't see the credit score companies adjusting their algorithms for this.


This is on the MSE website

"The three major credit reference agencies – Experian, Equifax and TransUnion have confirmed that customers’ credit scores WILL be protected when they have an agreed payment holiday in place. This special measure is called an “emergency payment freeze” and it means that a payment holiday will essentially be “invisible” on your credit report and help protect your payment history.

So, if you were up to date with your payments before the payment holiday, then you'll continue to be up to date throughout. If you were already in arrears, your arrears will be kept at the same level, so the payment holiday months won't be counted as more missed payments."

moneysavingexpert.com/new…ts/
68 Comments
So it’s the law? What if someone has bad credit CCjs surly this is unethical?
The banks owe us.
The banks in the UK seem to have given authority to behave like financial thugs in recent years. Their treatment of small business during this current crisis is criminal. Will they listen to the FCA to support ordinary people in their day to day struggle ...I doubt it
I read it as a payment freeze? Not interest freeze?

Great for genuine applicants but just open to abuse by knuckle draggers
Edited by: "samspud" 2nd Apr
qazim02/04/2020 09:32

So it’s the law? What if someone has bad credit CCjs surly this is u …So it’s the law? What if someone has bad credit CCjs surly this is unethical?


I believe this doesn't mean that anyone applying WILL get an overdraft - as indeed it may lead to believe.

I believe it means IF you are eligible for an overdraft, then the first £500 of it will be 0%

Happy to be clarified.
Edited by: "steevio_uk" 2nd Apr
Would a payment freeze be detrimental to one's credit rating?
YukonCashmere02/04/2020 09:40

Would a payment freeze be detrimental to one's credit rating?


No, they've said it will have no affect on credit rating.

qazim02/04/2020 09:32

So it’s the law? What if someone has bad credit CCjs surly this is u …So it’s the law? What if someone has bad credit CCjs surly this is unethical?


What does it have to do with CCJ? It's a temporary payment freeze on loans and credit cards for 3 months to give people some relief during the current situation, no different to the mortgage holidays.
Edited by: "LGB87" 2nd Apr
Overdrafts will be interest free. BUT loans and credit cards will still accrue interest. They will only be PAYMENT free.-

Apart from the zero interest on £500 of arranged overdrafts, firms would be entitled to charge a "reasonable rate of interest" when a customer requested a repayment holiday on loans, credit cards, and store cards.

Mr Lewis said: "Payment holidays mean exactly what they say - you don't pay, but you can still be charged interest. And with interest rates often high, especially on cards, that can mean storing up trouble for future.
YukonCashmere02/04/2020 09:40

Would a payment freeze be detrimental to one's credit rating?


According to MSE pausing mortgage payments would be.

Logically, when you look at your credit report you can see repayment history. It will be easy to spot the people who have needed the payment break and they would naturally become higher risk. Also it would be easy to see who has been using an overdraft over the same period.

It is good what is being offered / forced upon the banks. However, it should be taken as a last resort in my opinion, but not something everyone should use if they have funds / security to pay.

There is no such thing as a free lunch.

Its an unprecedented period for all of us, but I really can't see the credit score companies adjusting their algorithms for this.
HSBC have given me £300 interest free overdraft in the last few days without asking for one
If you can carry on paying your better off doing so, there will be loads just use the freeze on loans and cards for no reason and end up worse off..
I'm guessing if you weren't eligible before you won't be now either
Banks only take.
From BBC News:
"In a timeframe reserved for emergency measures, the City watchdog is asking banks to respond to its proposed measures by Monday 6 April, and it wants them to come into force by Thursday 9 April."


Not active just yet ladies and gents.
Wonder if would effect 0% transfers? If you miss a payment at the moment, you lose the 0% deal.
A lot of banks have already put overdrafts up and free I was happy to see 😁
speric0702/04/2020 09:48

According to MSE pausing mortgage payments would be. Logically, when you …According to MSE pausing mortgage payments would be. Logically, when you look at your credit report you can see repayment history. It will be easy to spot the people who have needed the payment break and they would naturally become higher risk. Also it would be easy to see who has been using an overdraft over the same period. It is good what is being offered / forced upon the banks. However, it should be taken as a last resort in my opinion, but not something everyone should use if they have funds / security to pay. There is no such thing as a free lunch. Its an unprecedented period for all of us, but I really can't see the credit score companies adjusting their algorithms for this.


This is on the MSE website

"The three major credit reference agencies – Experian, Equifax and TransUnion have confirmed that customers’ credit scores WILL be protected when they have an agreed payment holiday in place. This special measure is called an “emergency payment freeze” and it means that a payment holiday will essentially be “invisible” on your credit report and help protect your payment history.

So, if you were up to date with your payments before the payment holiday, then you'll continue to be up to date throughout. If you were already in arrears, your arrears will be kept at the same level, so the payment holiday months won't be counted as more missed payments."

moneysavingexpert.com/new…ts/
Great to see a bit of help at last. Not a long term solution to debt!
“Great” .......let’s say is good deal 3 months we use their money this lock down on us is gone take 3months apparently after we need to go back to work and pay interest until we catch up with debts which we created on the lock down time
I think this is only a suggestion to the banks they have to decide
speric0702/04/2020 09:48

According to MSE pausing mortgage payments would be. Logically, when you …According to MSE pausing mortgage payments would be. Logically, when you look at your credit report you can see repayment history. It will be easy to spot the people who have needed the payment break and they would naturally become higher risk. Also it would be easy to see who has been using an overdraft over the same period. It is good what is being offered / forced upon the banks. However, it should be taken as a last resort in my opinion, but not something everyone should use if they have funds / security to pay. There is no such thing as a free lunch. Its an unprecedented period for all of us, but I really can't see the credit score companies adjusting their algorithms for this.


It's not official but I have read that because this is all caused by covid 19 they're saying that it won't cause people a problem in the future if they take payment breaks or use overdrafts xxx
UK Banks need a massive investigation after this. They seem to be allowed to make up there own rules with no regard for there customers. Massive fines should be implemented on these Banks, and saleries CUT for the directors.
Psusu02/04/2020 10:17

“Great” .......let’s say is good deal 3 months we use their money this lock …“Great” .......let’s say is good deal 3 months we use their money this lock down on us is gone take 3months apparently after we need to go back to work and pay interest until we catch up with debts which we created on the lock down time


The powers that be will have to re evaluate things if it goes on for longer, but there are hard times ahead that's for sure
BTW - had no idea about the 40% overdraft charges coming in! How is that different from pay day lenders?? It's clearly designed to keep people in debt.
rubyrider02/04/2020 10:22

UK Banks need a massive investigation after this. They seem to be allowed …UK Banks need a massive investigation after this. They seem to be allowed to make up there own rules with no regard for there customers. Massive fines should be implemented on these Banks, and saleries CUT for the directors.


Doubtful!
Bananabrain02/04/2020 10:24

BTW - had no idea about the 40% overdraft charges coming in! How is that …BTW - had no idea about the 40% overdraft charges coming in! How is that different from pay day lenders?? It's clearly designed to keep people in debt.


It's a backlash from government saying they cannot charge the fees they were charging, they are a business after all and want as much profit as possible 😞
johnnyd57uk02/04/2020 09:33

The banks in the UK seem to have given authority to behave like financial …The banks in the UK seem to have given authority to behave like financial thugs in recent years. Their treatment of small business during this current crisis is criminal. Will they listen to the FCA to support ordinary people in their day to day struggle ...I doubt it


Sadly that’s very true and instead of dropping rates on loans and cards the banks are busily hiking rates to add to people’s misery. What the government should have done is set up a government backed loan at say 0.5%pa interest that anyone below a certain income could apply for which was then paid into their bank account monthly (rather than a lump sum) and then repaid at a time in the future when their income has recovered.
so does this mean that after the crisis they wont be allowed to hit us with charge's until we paid it back?
Unfortunately, if one is happy about free £500 overdraft something is very wrong. Guys please rather cut on mobiles, keep the old phone longer and cancel that subscription. (appreciate many really need it to get by). Bare in mind banks do not give you anything for free, they will ask you a few weeks down the road for the money or let you pay the usual hefty overdraft fees...
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deleted1833041
johnnyd57uk02/04/2020 09:33

The banks in the UK seem to have given authority to behave like financial …The banks in the UK seem to have given authority to behave like financial thugs in recent years. Their treatment of small business during this current crisis is criminal. Will they listen to the FCA to support ordinary people in their day to day struggle ...I doubt it


This is plain wrong. Banks are trying their best and should banks just blanket support all businesses, even the ones that aren't viable? Should they just run up 2008 debts again?
My friend self employed was refused an overdraft as he has a poor credit rating, in between waiting for Universal credit he has nothing to pay the bills. The bills are the only thing not stopping.
RogerPJK02/04/2020 10:56

Sadly that’s very true and instead of dropping rates on loans and cards t …Sadly that’s very true and instead of dropping rates on loans and cards the banks are busily hiking rates to add to people’s misery. What the government should have done is set up a government backed loan at say 0.5%pa interest that anyone below a certain income could apply for which was then paid into their bank account monthly (rather than a lump sum) and then repaid at a time in the future when their income has recovered.


But that would be helpful
12345678909876543202/04/2020 10:58

Unfortunately, if one is happy about free £500 overdraft something is very …Unfortunately, if one is happy about free £500 overdraft something is very wrong. Guys please rather cut on mobiles, keep the old phone longer and cancel that subscription. (appreciate many really need it to get by). Bare in mind banks do not give you anything for free, they will ask you a few weeks down the road for the money or let you pay the usual hefty overdraft fees...


True! Nothing comes without strings attached
deleted183304102/04/2020 10:59

This is plain wrong. Banks are trying their best and should banks just …This is plain wrong. Banks are trying their best and should banks just blanket support all businesses, even the ones that aren't viable? Should they just run up 2008 debts again?


Something has to give somewhere
jinkssick02/04/2020 11:03

My friend self employed was refused an overdraft as he has a poor credit …My friend self employed was refused an overdraft as he has a poor credit rating, in between waiting for Universal credit he has nothing to pay the bills. The bills are the only thing not stopping.


It's really sad so many are suffering. My husband is self employed so we have little to nothing coming in just now but we are aware of how fortunate we are to have recently sold our house and have some spare( supposedly to upgrade our new home which is in need of lots of attention ) but we will be ok xxx
12345678909876543202/04/2020 10:58

Unfortunately, if one is happy about free £500 overdraft something is very …Unfortunately, if one is happy about free £500 overdraft something is very wrong. Guys please rather cut on mobiles, keep the old phone longer and cancel that subscription. (appreciate many really need it to get by). Bare in mind banks do not give you anything for free, they will ask you a few weeks down the road for the money or let you pay the usual hefty overdraft fees...


Ah - that old chestnut!

If someone has been furloughed from their job, they may not be able to wait until the end of their phone contract to enjoy the saving of ££ a month that will probably do beggar all to replace the £££ drop in income they are now facing.

There's nothing wrong with having recurring payments for your phone, TV package etc. If you can easily afford them and they give you value.

These are unprecedented times - a million people applying for UC versus a more typical 100,000 suggests a calamity, not poor budgeting
johnnyd57uk02/04/2020 09:33

The banks in the UK seem to have given authority to behave like financial …The banks in the UK seem to have given authority to behave like financial thugs in recent years. Their treatment of small business during this current crisis is criminal. Will they listen to the FCA to support ordinary people in their day to day struggle ...I doubt it


Dirt birds
From what I just read on the BBC News website, the title of this is wrong - it is not a "credit card interest freeze" but a "credit card repayment freeze", which would mean the interest still builds up while you are not paying it off. This is backed up by Martin Lewis saying ""Payment holidays mean exactly what they say - you don't pay, but you can still be charged interest. And with interest rates often high, especially on cards, that can mean storing up trouble for future." so be careful when using any scheme like this as the only "free" bit seems to be the £500 overdraft.
sm969002/04/2020 10:12

This is on the MSE website "The three major credit reference agencies – E …This is on the MSE website "The three major credit reference agencies – Experian, Equifax and TransUnion have confirmed that customers’ credit scores WILL be protected when they have an agreed payment holiday in place. This special measure is called an “emergency payment freeze” and it means that a payment holiday will essentially be “invisible” on your credit report and help protect your payment history. So, if you were up to date with your payments before the payment holiday, then you'll continue to be up to date throughout. If you were already in arrears, your arrears will be kept at the same level, so the payment holiday months won't be counted as more missed payments."https://www.moneysavingexpert.com/news/2020/03/uk-coronavirus-help-and-your-rights/#accordion-content-2056571295-3


Yes but banks still have access to the information. If you have a credit card with HSBC and then apply for a mortgage with them, they would have this information
Any response from TSB regarding this?
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