On Thursday 9th April, anyone who was struggling to stay on top of the debt they had, whether it was credit cards or loans, and overdrafts, would benefit from payment freezes.
This is part of the emergency package that the Financial Conduct Authority set up in response to the coronavirus pandemic. As of the 14th, those measures were extended to include other types of credit, including catalogue credit and store cards, with car financing measures following shortly after.
Although the rules were introduced initially at the start of April and many of the country’s biggest banks adopted them early on, they were rolled out across the rest of the sector.
Credit Cards and Personal Loans
With regards to credit cards and personal loans, providers are obliged to offer a temporary freeze on payments for as much as 3 months, for any of their customers whose finances have been adversely affected by the pandemic. upmoney.co.uk an online comparison company are there to help find you the right type of credit in these uncertain times. It also has been ruled that banks can’t suspend customer’s cards at this time either.
It is your legal right, therefore, to ask for a 3-month repayment freeze on any kind of loan or credit such as home collected credit/doorstep credit, logbook loans, guarantor loans, catalogue credit, store cards, credit cards or personal loans.
At the time of the ruling, payday loans were not covered by these temporary rules and there was no allowance for cars that had been bought via hire purchase or leasing. However, the FCA has said they will be looking into those areas as well along with other forms of lending.
Although peer-to-peer loans are also not covered, the FCA has stipulated that it firms should help their customers experiencing financial difficulties.
It is important to bear in mind that mortgage payment holidays, most payment freezes aren’t free. All customers are still expected to pay back the interest accrued after the break finishes.
Overdrafts
With regards to overdrafts, an arranged overdraft is able to ask for as much as Ā£500 overdraft borrowing without accruing payment for as much as 3 months. If you have an arranged overdraft of less than Ā£500, you are not expected to pay interest if you eat into the current limit you have on your overdraft. If the limit is less than Ā£500 or you are without an overdraft, you could request an increase in the limit or a brand-new overdraft. For this, you will still undergo the same affordability checks.
Credit Records
Your credit record should not be affected if you take advantage of these payment freezes. According to the FCA, firms should make sure that the credit files of any customers using the measures are not affected.
Times When Banks Are Allowed to Refuse
There are some situations when banks can refuse payment freezes. Only, though, if it is not in the interest of the customer to do it. For instance, if it meant they had a higher debt burden overall instead of what they would have from other options. The FCA has noted that banks and lenders should provide over avenues of help for customers when they can’t offer payment freezes, such as loan term extensions and interest waiving.