PAYMENT LEAVES have brought precious relief to many Britons in the face of the financial challenges COVID-19 has brought. Now many people can expect more support.
Payment holidays should provide financial aid to households suffering from the ongoing pandemic. The support measure was supposed to end on October 31st and for many Brits it would mean a month-long payment freeze. However, amid the second lockdown and ongoing issues, the Financial Conduct Authority (FCA) has announced how lenders should proceed.
She tabled her proposals today, the adoption of which is likely to have a significant impact on how consumers are supported.
The main proposal put forward by the watchdog is to broaden payment deferrals and provide additional support for personal loans and credit cards.
This is for those who continue to experience payment difficulties due to the COVID-19 pandemic.
The proposals mean that those who have not yet had a grace period may be able to receive two grace periods of up to six months.
However, there is some other support for those who have already taken a payment vacation.
These persons are entitled to a further postponement of up to three months in total.
A deferral of one month is available for those on payday loans, also known as high-cost short-term loans, who have not had payment vacation.
While the original deadline was October 31, the FCA’s new proposals would give customers until January 31, 2021 to request a payment vacation.
For those concerned about their future creditworthiness, the FCA has issued additional guidance.
The proposed proposals would mean that payment leave would not count towards a borrower’s credit record.
However, this does not mean that lenders cannot take this into account in future lending decisions.
For those who have already received two payment holidays, the FCA has recommended a different approach.
These individuals can expect to receive the form of bespoke support originally proposed by the FCA prior to these new proposals.
This means that lenders should not use the “one-size-fits-all” approach that has been followed in the past.
However, this type of assistance can also be recorded on a loan file, which is why borrowers may want to be careful.
However, lenders should let their customers know when this will happen.
Sheldon Mills, Interim Executive Director for Strategy and Competition at FCA, commented on the measures.
He said, “We know that many consumer borrowers are vulnerable.
“Because of this, bespoke support will continue to be offered to reflect borrowers’ individual circumstances and remains the most appropriate option for many.
“We also propose extending the deferrals for some consumer credit products to provide additional support.
“It is in borrowers’ own long-term interests to defer payments only when absolutely necessary. Those who are all supposed to keep paying should do so.
“We also ask borrowers not to contact their lender yet and instead wait for more updates soon, including from their lenders.”
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