The Financial Conduct Authority (FCA) has extended its freezing of credit card and loan payments for consumers until 31 October.
The measures were first announced by the financial watchdog back in April, and includes store cards, overdrafts, and catalogue credit. Customers who have not requested a payment freeze, or interest-free overdra
ft of up to £500, have until 31 October to apply for one.
As for consumers who have already opted for a payment freeze but are still facing financial difficulties due to the current pandemic and subsequent lockdown, the FCA has advised firms to continue offering support for another three months. This could be in the form of further payment deferral, or the reduction of payments to a more manageable level.
The extension comes as UK Finance announced that around one in six homes are now subject to a payment holiday - a total of just under 2 million mortgages.
Interim FCA chief executive, Christopher Woolard, said: “We have been working closely with other authorities, lenders and debt charities to support consumers in the current emergency. The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus.”
Firms will be contacting customers at the end of the first payment freeze to assess whether payments can be resumed and how missed payments can also be made.
“Where consumers can afford to make payments, it is in their best long-term interest to do so but for those who need help, it will be there,” said Woolard.
Struggling customers who have already been granted a £500 interest-free overdraft can request another one of upto £500. They can also ask for a reduced rate of interest on any borrowing above the £500 limit.
The new guidance does not apply to other consumer products, including payday loans and motor finance. The FCA said that it would be updating its guidance for other products soon.
Chief executive of the Money Advice Trust, Joanna Elson, welcomed the FCA giving consumers more time to pay.
“The financial shock to households that the outbreak has caused is like nothing we have seen before and we expect debt problems to increase significantly in the months ahead,” said Elson.
UK Finance’s managing director of personal finance, Eric Leenders, said that a clear plan for helping customers was a prime concern for the industry.
“Lenders understand that many households will continue to see their finances squeezed as the pandemic continues and we are working hard to ensure everyone gets the support suited to their needs,” said Leenders.
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