Let’s be honest, there hasn’t been much good news when it comes to coronavirus.
Fortunately, for those struggling with debts right now, there’s potentially a bit more leeway from this month thanks to the Financial Conduct Authority (FCA).
The FCA has just issued new, wide-ranging guidance for lenders in relation to consumer credit and overdraft users who are experiencing repayment difficulties as a result of coronavirus.
The new guidance, applicable from 2 October 2020, will cover anyone who came into financial difficulty and received help as part of the previous temporary guidance (spanning from July to October) or who are experiencing issues for the first time.
Alongside an arsenal of other support, for the first time, the FCA has said that it will expect firms to “prevent customers’ balances from escalating once they have put in place a repayment arrangement by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen”.
It will cover those who are borrowing through credit cards, store cards, catalogue credit, personal loans, motor finance, buy now pay later schemes, rent to own schemes, pawnbrokers, high-cost short term credit products and overdrafts.
What it means for you…
You still need to repay your debts. But the onus is on the lenders to make your debts more manageable.
The key phrase here is “prevent customers’ balances from escalating once they have put in place a repayment arrangement” so the first step would be to arrange a repayment plan with your lender.
The reduction or cancellation of interest, fees or charges after that is obviously entirely down to the lenders’ discretion and will likely involve a number of conversations around affordability.
Indeed, Christopher Woolard, interim chief executive at the FCA, said: “For those who can restart payments, it is in their best interests 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 or national responses to the crisis.
“There should be no ‘one size fits all’ approach taken by firms to help consumers get back on track.”
But the fact that the option is now on the table means that if you need it, you can ask for it.
It’s worth bearing in mind that while any additional support will be offered to you if you need it, these will be recorded in your credit file, which will be accessible for lenders in future.
So while you may get a breather for the time being, it may be difficult for you to borrow in future and it may take you some time to build up your credit again. That’s another reason to be absolutely honest about where you are financially.