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To say there’s been a lot in the news recently is an understatement. Mass protests, terror attacks, the debacle over the scrapped NHS track and trace app… the list goes on. Little wonder that many of us may have missed the FCA’s announcement on Friday about loan and credit card payment holiday extensions.

In April, we reported on how the FCA asked lenders to offer struggling borrowers a three month freeze on credit card payments. Similarly, it asked banks not to increase overdraft costs and to offer interest-free overdrafts of £500 for up to three months.

The FCA’s new proposals will see most of this support extended until 31 October 2020. The opportunity to comment on the proposals ends today. The official guidance will be released shortly afterwards.

Assuming the proposals are implemented without change, let’s take a look at what they could mean for you.

How will loan and credit card payment holiday extensions work?

The proposals cover loans, credit cards (including store cards and catalogue credit), as well as overdrafts.

For people who have not yet asked lenders for help, the two key points are:

  • If you have not yet asked for a payment freeze on a loan or credit card, you have until 31 October to ask for one.
  • If you have not yet asked for an interest-free overdraft of £500, you have until the same date to request one.

For those who have already asked for a payment holiday, the main things you need to know are:

  • When your payment freeze period comes to an end, lenders must contact you to find out whether you can start repayments again.
  • If you still need help because of the impact coronavirus has had on your finances, lenders should reduce your loan or credit card payments to a level you can afford.
  • If you have a £500 interest-free overdraft, you can request a 3-month extension. You can also request lower interest rates on borrowing above the £500 buffer.
  • Payment freezes or partial payment freezes should not have a negative impact on your credit files.

The FCA’s earlier guidance had an expectation that banks would not leave overdraft holders worse off on price (banks were planning to introduce new overdraft rates). This will no longer be the case. However, if you are affected by coronavirus you can ask your lender for lower interest rates on borrowing above £500.

What about other kinds of borrowing?

We’ve already reported on mortgage payment holiday extensions, which were introduced on 4th June.

With regards to other types of borrowing, the FCA says:

“…other consumer credit products, such as motor finance, high-cost short-term credit, rent-to-own, pawnbroking and buy-now pay-later… are covered by separate guidance which will be updated soon.”

We’ll update you on any changes when they are published. In the meantime, if you need any advice on your accounts please do speak to your THP account manager.


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