Extension Of Credit Holidays
The Financial Conduct Authority (FCA) has announced that it has issued instructions to credit providers to extend the ‘credit holidays’ to customers who are still experiencing repayment problems due to Covid-19.
The measures outline the options that lenders will provide to credit card and other revolving credit (store card and catalogue credit) and personal loan customers who are coming to the end of a payment freeze and for customers who have agreed an arranged interest-free overdraft of up to £500.
Customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500 will have until 31st October 2020 to apply for one.
The details of the updated FCA measures, which came in to force on 3rd July, are:
- If customers can afford to return to regular repayment, or make partial payments, it is in their best interest to do so.
- Lending firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.
- For customers still facing temporary payment difficulties as a result of Coronavirus, lending firms will provide them with support, which could include freezing or reducing payments on their credit card and personal loans to a level they can afford for 3 months.
- Customers who are negatively impacted by Coronavirus and who already have an arranged overdraft on their main personal current account can request up to £500 interest-free for a further 3 months. Firms will also provide these customers with further support where it is needed including reducing the cost of borrowing above the interest-free buffer, especially if this cost of borrowing would otherwise increase.
- Customers that have not yet had a payment freeze or an arranged interest-free overdraft of up to £500, and who experience temporary financial difficulty due to Coronavirus, would be able to request one up until 31st October 2020.
- Any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files; however, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.