Regulator confirms further support for credit card and personal loan customers

Further support for borrowers whose finances have been affected by coronavirus, such as those with credit cards and personal loans, has been confirmed by the City regulator.

The Financial Conduct Authority is updating its guidance for firms, which also covers store cards, catalogue credit, rent-to-own, buy now, pay later, pawnbroking, motor finance and payday loans.

Consumers who are struggling with the cost of their overdrafts as a result of coronavirus can request support which reflects their individual circumstances, as set out in the FCA’s tailored support guidance, published in September. This could include reducing or waiving interest.

The new guidance will come into force on November 25 but the FCA is encouraging firms that are able to start providing enhanced support sooner to do so.

Consumers will have until March 31 2021 to apply for an initial or a further payment holiday.

After that date, they will be able to extend existing deferrals to July 31 2021, provided these extensions cover consecutive payments, and subject to a maximum of six months’ worth of deferrals being allowed.

Under the new guidance:

– Borrowers who have not yet had a payment deferral will be eligible to apply for payment deferrals of up to six months in total.

– Those who currently have a payment holiday will be eligible to apply for a further deferral, as long as the total length does not exceed six months.

– Those who have previously had a payment deferral of less than six months will also be eligible to apply for a further payment deferral, as long as the deferrals do not exceed six months in total.

– High-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of one month.

The FCA said some firms may decide that a payment deferral is not in a customer’s interest. In such cases, the firm should instead provide tailored support appropriate to the customer’s circumstances, it said.

People who have already had six months of payment deferrals but are still in difficulties should receive support tailored to their needs.

Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “It is in a consumer’s best interest to only take a payment deferral when absolutely necessary. Those that are able to keep paying should do so.

“However, for those continuing to face payment difficulties as a result of coronavirus, these measures will ensure they continue to be able to access much-needed support during this crisis.

“We also want to highlight that tailored support will still be offered and remains the most appropriate option for many borrowers.”

A payment deferral under the new finalised guidance would not be reported as missed payments on a consumer’s credit file. This does not mean that consumers’ ability to access credit will be unaffected, as lenders may take into account a range of information when making lending decisions.

But tailored support may be reported on a consumer’s credit file, and lenders should inform consumers where this will be the case. This would include any further payment deferrals offered.

The FCA said it will continue to keep the support available to consumers under review.