Help for consumers to manage their credit and debt has been extended to the end of October.
In mid-June, the Financial Conduct Authority (FCA) told firms to extend measures to provide help to people with credit cards, store cards, catalogue credit and personal loans who faced difficulties with their finances as a result of the Covid-19 crisis. This help was set to last initially for three months from April, but a recent update means there will now be a further three months’ flexibility ending on 31 October 2020.
Payment freeze
If you have already taken a payment freeze, you may now be able to take a further payment deferral or reduce payments to what you can afford. For anyone who has not yet requested a payment freeze, they can do so during the extended period.
A very important consideration is that you must still pay the debt back at the end of the deferral period, so there is potential to simply store up problems for a later date. With many people now returning to work, it makes sense to try to resume payments as soon as possible. It is at the discretion of the firm involved whether you will be charged interest during the payment freeze.
In theory, payment deferral should not affect your credit rating, but there is no guarantee that all loan providers will abide by this.
Overdrafts
Bank customers have been able to apply for an interest-free overdraft of up to £500. The interest-free period will now also run until 31 October 2020. Anyone who has not yet taken advantage of this measure has further time to do so. You can also request a lower rate of interest on borrowing in excess of the £500 interest-free buffer.
However, the FCA has not extended the temporary measure that meant overdraft customers were no worse off, with regards to their potential overdraft charges, than before April when a new temporary pricing structure for overdrafts was introduced. Although only a single rate of overdraft interest can now be charged, this can be around 40%.
The FCA provides detailed guidance on what Covid-19 means for your finances.
If you need any assistance interpreting the guidance, contact one of our Accounting & Business Advisory on 0114 266 4432 or info@smhca.co.uk
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