Regulators have confirmed the new rights for borrowers with credit cards, overdrafts or other loans.
Since the coronavirus pandemic began back in March, borrowers have had the right to take a payment holiday on overdrafts, credit cards and other debts however that right is set to end next month. Now though, the FCA have confirmed what borrowers rights will be moving forward.
Figures show that 1,085,000 credit card payment deferrals and 738,000 personal loan payment deferrals have been made by customers since the payment holidays were launched.
The new rules and rights for borrowers will help to prevent anyone struggling financially thanks for the pandemic from having their debt balloon substantially.
The Financial Conduct Authority (FCA) said that lenders will be required to offer customers tailored support in order to prevent their debt from spiralling. The tailored support will include things such as scrapping interest payments, extending loan terms and removing other charges.
The new guidance covers borrowers with credit cards, store cards and catalogue credit, personal loans, car finance, buy-now-pay-later, rent-to-own, pawnbroking, high-cost-short-term credit products and overdrafts.
Chris Woolard, FCA interim chief executive said of the new rules and regulations: “For those who can restart payments it is in their best interest to do so.
“However for those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local and national responses to the crisis.
“There should be no ‘one size fits all’ taken by firms to help consumers get back on track.”
Whilst the extension of the rights for borrowers allows them to keep on top of their debts there is one noticeable change. Previously taking out a payment holiday as a direct impact of the pandemic would not show up on a borrower’s credit record, ensuring that a one-off problem didn’t impact your financial decisions in the future.
Moving forward however, as of November any financial help a lender offers borrowers will feature on their credit file. The FCA said it had made this particular change in order to give firms “an accurate picture of consumers financial circumstances” and to help reduce the risk of unaffordable lending.