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Banks ordered not to cancel people’s credit cards

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Via Yahoo Finance

Banks have been ordered not to cancel customers’ credit cards until October, as part of measures to help people deal with financial hardship cause by the coronavirus.

Instead, borrowers will be given more time to start paying off their debts, the City watchdog has said.

The Financial Conduct Authority (FCA) introduced rules in September 2018 requiring lenders to contact customers in persistent debt that they have not reduced for 18 months.

After the initial 18-month period comes to an end those who have not brought down their balances can be put onto a payment plan or see their cards cancelled.

But on Tuesday the FCA relaxed those rules, telling lenders to give customers more time to respond to requests to pay up.

“Given the challenges facing many customers at present we think they should be given more time, until 1 October 2020, to respond to firms’ communications,” the FCA told banks.

“This applies both to those who have already received communications from their provider and those that are yet to receive them.”

The coronavirus is likely to cause financial difficulty for a significant number of people as the economy slows and companies are forced to make staff redundant.

In a statement detailing its response to the Covid-19 pandemic, the FCA said it was “encouraged” by the actions of some banks who have granted repayment holidays for mortgage customers experiencing difficulties.

The regulator also praised firms who have allowed customers to withdraw money from savings accounts that normally incur a penalty for taking cash out early.

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“We expect firms to provide strong support and service to customers during this period,” the FCA said.

“Our rules already provide flexibility to firms in a number of areas and we expect them to use this flexibility to support consumers, bearing in mind customers’ individual circumstances.

”We welcome firms taking initiatives going beyond usual business practices to support their customers.“

It also asked banks to help customers who may be using online banking services for the first time as a result of social distancing and quarantine measures introduced this week.

The government “strongly advised” people aged over 70 to avoid non-essential social contact, use of public transport and gatherings with friends and family. That risks cutting off from access to bank branches the age group most reliant on them.

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