Credit card and personal loan rules change in light of second lockdown – FCA announcement

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Credit card repayments and other forms of debt were offered relief from the FCA in recent months, as payment holidays were extended to them. These payment holidays were all set to end come October 31 but as Boris Johnson announced a second lockdown in England, the financial regulator announced the rules would be extended, at least temporarily.

The FCA announced today they will update their temporary guidance on personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawnbroking and high-cost short-term credit to support consumer credit customers financially affected by coronavirus.

As they detailed in their announcement: “To support those financially affected by coronavirus, we will propose that consumer credit customers who have not yet had a payment deferral under our July guidance can request one.

““This could last for up to six months unless it is obviously not in the customer’s interests.

“Under our proposals borrowers who are currently benefitting from a first payment deferral under our July guidance would be able to apply for a second deferral.

“For high-cost short-term credit (such as payday loans), consumers would be able to apply for a payment deferral of one month if they haven’t already had one.

“We will work with trade bodies and lenders on how to implement these proposals as quickly as possible, and will make another announcement shortly.

“In the meantime, consumer credit customers should not contact their lender just yet. Lenders will provide information soon on what this means for their customers and how to apply for this support if our proposals are confirmed.

“Consumer credit customers who have already benefitted from payment deferrals and are still experiencing payment difficulties should speak to their lender to agree tailored support.”

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It should also be noted the FCA announced they will update their guidance on mortgage support (likely meaning mortgage payment holidays) but details on this have yet to be revealed.

The announcement of payment holiday extensions have been welcomed but some organisations have also detailed support is still needed elsewhere.

As Joanna Elson, the chief executive of the Money Advice Trust, noted: “The FCA has been right to respond quickly to this second lockdown, which will unfortunately see many more households fall into financial difficulty – some of them for the first time. Extending the availability of payment deferrals on both mortgages and consumer credit is a sensible approach.

“Together with the Government’s extension of the Job Retention Scheme this will at least mitigate some of the financial impact of the resurgence of Covid-19.

“We need similar action, however, for people who are self-employed – including increasing Self-employment Income Support Scheme grants back to 80 percent of average earnings, to match the support available through furlough.

“Worryingly, the government’s temporary scrapping of the Minimum Income Floor – which has given self-employed people fairer access to Universal Credit – comes to an end later this month. This change must be extended straight away.

“Help for homeowners with mortgages must be matched with help for people struggling to pay their rent – including a further freeze on repossessions, increasing the rate of Local Housing Allowance to cover 50 percent of average market rents, and more discretionary support.

“More widely, it is becoming increasingly clear that the Government will have to extend its £20 a week uplift in Universal Credit beyond April.

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