• FCA extends applications for payment breaks until 31st March 2021
  • Extension help will cover users of credit cards, other revolving credit, personal loans, motor finance, buy-now-pay-later and pawn broking credit
  • FCA states that firms will continue to tailor support to overdraft borrowers, as per guidance set out in September 2020
  • FCA publishes new rules for mortgage customers, who can apply for new payment holidays until 31 March 2021

Another extension for borrower’s post UK’s second lockdown

The FCA has extended applications for payment holidays until 31st March 2021 to help support borrowers during the pandemic.

The updated guidance, that came into force on 25th November 2020, is to ensure firms enable customers, that are experiencing payment difficulties, get a payment deferral or tailored support. It covers users of credit cards, other revolving credit, store cards, catalogue credit, personal loans, motor finance, rent to own, buy-now-pay-later, high-cost short term credit and pawn broking credit.
The FCA isn’t encouraging consumers to request payment referrals (also known as freezes and payment holidays) and if they can afford to keep up with payments on their loans or credit products they should do so.

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 can keep paying should do so.

‘However, for those continuing to face payment difficulties because 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.’

The Rules: What does the new guidance mean for borrowers?

This is very welcomed news for many people facing new challenges, especially with the governments furlough scheme ending. The rules are:

  • If you have not yet had a payment deferral, you will be eligible to apply for one for up to 6 months in total.
  • If you currently have a payment deferral or previously had one, you will be eligible to apply for another deferral, as long as the total duration doesn’t exceed a maximum of 6 months in total.
  • IIf you request a payment deferral, your firm may decide that it is not in your best interest. If this happens the firm should instead provide tailored support appropriate to your circumstances.
  • IIf you have already had 6 months of payment holiday or are in arrears, or receiving tailored support, you will not be eligible for a further deferral. Instead, your lender will provide support appropriate to your circumstances. This might include the option to defer further payments.
  • IIf you are a high-cost short-term credit consumer, ie: with a payday loan, you could be eligible for a payment deferral of one month.

Customers have until 31st March 2021 to apply for a payment deferral or an additional one and after this date, you will be able to extend existing deferrals to 31st July 2021, providing this extension covers consecutive payments and subject to the maximum of 6 months.

What do the new rules mean for overdraft borrowers

FCA stated that firms will continue to tailor support to overdraft borrowers, as per guidance set out in September/October 2020.

The support that could be available includes: lowering or waiving interest, agreeing a programme or staged reductions in the overdraft limit or transferring the overdraft to an alternative credit product on more suitable terms.