Payment holidays were implemented by the Financial Conduct Authority in a trickle down policy to popular providers amid the pandemic. The reprieve has so far been taken up by close to 1.5 million people to help with credit cards and personal loans. According to UK Finance, close to 900,000 borrowers have taken on a payment freeze on their credit card alone.
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The government recently announced a payment holiday extension for mortgages, providing additional relief for the thousands who have taken up the scheme since March.
However, banks are reportedly discussing whether a similar extension for credit cards and personal loans should be put into place, and how this can be achieved.
The Financial Times reported that a senior banker in the talks believed this extended payment freeze could be implemented in a similar way to mortgage payment holidays.
Currently, people who are facing financial challenges due to the COVID-19 outbreak can ask for a three month payment freeze.
Alternatively, some providers allow customers to pay a nominal amount on their credit cards for the duration of the pandemic.
Those who wish to receive a payment freeze for personal loans can currently obtain this for up to three months, but have to approach their lender to apply.
Existing payment holidays are due to wind down within the coming weeks, however an extension may be necessary for those still struggling financially.
The FCA previously stated it would be reviewing the guidance “in the next three months in the light of developments regarding COVID-19”.
The organisation stated this guidance could then be revised if appropriate.
However, payment holidays have garnered significant discussion in recent weeks.
This is because interest will still be incurred on debts in the meantime.
Borrowers could, for this reason, simply be storing problems, as they still have to be addressed at a later date.
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For this reason, borrowers have been urged to think carefully before adopting a payment holiday.
In addition to payment holidays, the FCA has required banks to offer up to £500 in interest-free overdrafts for those with existing arrangements.
In order to qualify, people must show they have been financially impacted by COVID 19.
This has had an impact on more than 27million customer accounts during the crisis.
Both UK Finance and the FCA did not comment when asked by the Financial Times, but it is speculated the mortgage payment holiday extension could mean credit extensions are more likely.
UK Finance, however, has previously commented on the option of payment holidays.
The organisation said: “Firms will help customers the best way for the individual.
“But an automatic payment holiday may not always be the most suitable approach, and may not be required by all customers.”
Banks are still obliged under FCA rules to ensure all repayments eventually occur.
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