Great Britain

Banks to give up to £500 interest-free overdrafts to customers due to coronavirus cash crisis

BANKS are to give customers an interest-free overdraft worth up to £500 to help them through a cash crisis caused by coronavirus.

The move has been approved by the city watchdog and will give banks the option to offer the emergency measure to those who are struggling financially.

The idea was proposed by the Financial Conduct Authority (FCA) last week after it warned it wants banks to do more to help Brits pushed into debt by the impact of coronavirus.

But it also stressed that banks should ensure that borrowers are no worse off compared to before new overdraft rules came into force on Monday.

The Financial Conduct Authority (FCA) says that it will help borrowers with credit cards, loans and overdrafts who are facing temporary financial difficulties because of the pandemic.

The interest-free overdrafts will only be offered to customers who already have an arranged overdraft and who's finances have been negatively impacted by coronavirus measures.

They're just one part of a package of measures that have been approved.

Banks and lenders are now also expected to offer temporary payment freezes on loans and credit cards for up to three months.

These include guarantor loans, logbook loans, home collected credit, loans issued by Community Development Finance Institution and regulated loans issued by credit unions.

The rules also applies to firms which have acquired these types of loans.

Banks and building societies must also make sure that customers' credit scores will not be affected if they accepting help by pausing repayments.

Christopher Woolard, interim chief executive at the FCA, said that the measures offer "short-term financial support".

He added: "Customers should think carefully before making use of these measures and only do so if they need immediate help.

"Where they can still afford to make payments, they should continue to do so."

The rule changes come into force from today but banks don't have to offer the options until Tuesday April 14, to give them enough time to get the right resources ready.

However, the FCA has confirmed that some firms, including major banks and building societies, will be adopting the changes from today.

Lloyds, HSBC and Santander announced that they were offering the overdrafts free of charge earlier this week.

More to follow...

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