The FCA has announced proposals to extend the payment freeze of consumer credit products for people whose finances have been negatively impacted by Covid-19.
The proposals outline the support firms would be expected to provide credit card and other revolving credit (store card and catalogue credit) and personal loan customers coming to an end of a payment freeze, as well as those who are yet to request one.
For customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500, the time to apply for one would be extended until 31 October 2020.
For those who have already taken up support and are still experiencing temporary payment difficulties due to coronavirus, firms would continue to offer support with options including a further payment deferral or reducing payments to an amount the customer can afford for a further three months.
Christopher Woolard, interim chief executive at the FCA, 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. 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.”
Richard Lane, director of policy and external affairs at StepChange, added: “The extension of payment holidays for credit cards, overdrafts and other forms of consumer credit will come as a huge relief for the many thousands of households struggling to keep up with credit repayments during this pandemic. But unless further long-term support measures are put in place, this relief will be short-lived. Our own research has found that 4.2 million people have borrowed to make ends meet since lockdown began, storing up a tsunami of £6bn of debt that is set to worsen if left unchecked.
“With many households wondering how they will catch up with deferred payments, the FCA must not let payment holidays end with a cliff edge to debt. Withdrawing help from those who need more time to recover risks exposing them to avoidable long-term financial difficulty.
“With people also falling behind on rent, council tax and fuel bills, the government needs to build up dedicated hardship funds for those forced into debt thanks to Covid-19. In the long-term, more viable alternatives to high cost credit must be made available to prevent those on the lowest incomes falling into a debt spiral.”