As the financial effects of coronavirus continue to bite, loan and credit card providers have little choice but to continue providing interest-free overdrafts and payment deferrals and freezes to their customers.
Data from trade association UK Finance shows that the UK’s credit card providers have now granted more than one million payment deferrals, while personal loan providers have granted this facility to more than 700,000 customers.
More than one million of the total 1.7 million deferrals were provided in the three months between mid-April and mid-July.
The Financial Conduct Authority is now urging consumers who can afford to resume loan and card repayments to do so, but it is clear that a great many people are still suffering the financial consequences of the Covid-19 pandemic and require additional support.
A £500 interest free overdraft has also been offered on more than 27 million bank accounts.
Eric Leenders, managing director of personal finance at UK Finance, said:
“Many borrowers facing financial pressures are taking up the measures being offered by lenders to help them get through this crisis. The banking and finance industry has a clear plan to help the country through these tough times and is committed to providing ongoing support to those customers who need it.”
Anyone adversely affected by coronavirus now has until October 31 2020 to request either a £500 interest-free overdraft or a three-month payment freeze.
Where customers come to the end of a previously agreed payment freeze period, firms should contact their customers to find out if they can resume payments, and if so, agree a plan on how the missed payments could be repaid. If the customer is still unable to make any form of repayment, they should be offered a further payment deferral. If they are able to make reduced payments, the firm must ensure that they only repay what they can afford.
As with previous FCA interventions in this area, any forbearance granted to a customer affected by Covid-19 must not have a negative impact on their credit file, and firms are responsible for ensuring that this does not occur.
Firms will also need to consider whether it is appropriate to refer customers to providers of free debt advice and other money guidance services.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article