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News | Published June 20 2020

Freeze on credit card debt extended for another three months

The FCA is set to order banks to give millions of people struggling with credit card debt more time to pay it back.

In April, the regulator announced that banks would have to give customers with debt on credit, store and catalogue exchange cards the option to defer repayments for three months, with people able to apply for the scheme until the end of July.

The window for deferral has now been extended for a further three months, and the deadline pushed back until the end of October.

However, the FCA also advised that those borrowers who could make repayments should, in the interest of avoiding greater financial difficulty in the future.

Criteria for repayment deferral will vary from bank to bank, and it is understood that some may also just request customers pay a reduced minimum repayment every period.

The regulator also requested that banks made sure a deferral option did not affect borrowers' credit scores.

This measure was the first of two brought in to help bank customers with their personal finances, with the other being the option of an interest-free overdraft of up to £500.

However, price freeze regulation which was planned to be brought in over the next few months has not yet passed, and this may present problems going forward.

Sarah Coles, who works for investment platform Hargreaves Lansdown, explained: "Banks will be able to ramp up overdraft charges to the sky-high levels they were planning before this all kicked off. Suddenly you could be left paying around 40 per cent interest on your coronavirus debts.

"This feels like an awful time to be dropping this kind of burden on people."

The extension for the debt "holiday" has not been put into place as yet, but is expected to be active in just a matter of days.

Interim CEO of the regulator, Christopher Woolard, said these measures would provide "an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus".

Mr Woolard continued: "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."


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Authored by

The Parliamentary Review

@theparlreview
June 20 2020

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