The UK’s financial watchdog has extended emergency measures to allow consumers struggling financially because of the coronavirus outbreak to freeze loan and credit card payments until 31 October.
The measures, which were announced by the Financial Conduct Authority in April for an initial period of three months, also include overdrafts, store cards and catalogue credit.
Customers who have yet to request a payment freeze, or an arranged interest-free overdraft up to £500, can apply for one until 31 October.
For consumers who have already taken one and are still experiencing temporary payment difficulties because of the health emergency, the FCA said firms must continue to offer support including further payment deferral, or reducing payment amounts to a manageable level, for a further three months.
The extension came as UK Finance said that 1.9m mortgages were now subject to a payment holiday, the equivalent of one in every six home loans.
Struggling borrowers have deferred payments worth typically £755 a month under the government rules designed to help those who have been furloughed or lost their jobs.
“We have been working closely with other authorities, lenders and debt charities to support consumers in the current emergency,” said Christopher Woolard, the interim chief executive at the FCA. “The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus.”
At the end of a first payment freeze, firms are expected to contact customers to see if they an afford to resume payments and, if so, how they can repay missed payments.
“Where consumers can afford to make payments, it is in their best long-term interest to do so but for those who need help, it will be there,” Woolard said.
Customers who have already arranged an interest-free overdraft and are still struggling can request another one of up to £500. They will also be able to request a reduced interest rate on any additional borrowing in excess of £500.
The FCA’s new guidance does not apply to other consumer credit products such as motor finance, payday loans and buy now, pay later. The regulator said that the separate guidance it had previously issued covering these products would be updated soon.
Joanna Elson, the chief executive of the Money Advice Trust, said the FCA was right to give people more time.
“The financial shock to households that the outbreak has caused is like nothing we have seen before and we expect debt problems to increase significantly in the months ahead,” she said.
The FCA had already extended mortgage payment holidays until the end of October and UK Finance said lenders would be contacting borrowers who were coming to the end of their three-month deferral to discuss their options.
In the first three weeks of the scheme, 1.2m mortgages were deferred and those borrowers will be due to resume payments soon.
Eric Leenders, UK Finance’s managing director of personal finance, said the industry had a clear plan to help consumers.
“Lenders understand that many households will continue to see their finances squeezed as the pandemic continues and we are working hard to ensure everyone gets the support suited to their needs,” he said.
