Debt Holiday Option Extended Until October 31
June 26, 2020
A policy that means consumers can defer their debt repayments if they’ve been affected by the coronavirus crisis has been extended until the end of October.
The option of activating a debt holiday was first made available in the aftermath of COVID-19 first coming to the UK but it has now been extended to keep some of the financial pressures off hard hit consumers.
Credit card and personal loan debts, as well as store card arrears and overdrafts, are all covered by the policy, which is being insisted upon by the Financial Conduct Authority (FCA).
The UK’s main financial services watchdog says that consumers should be allowed to request a freeze on their loan or debt repayments right up until October 31st.
Another option being made available to everyone who’s taken a financial hit in recent months is that of using a £500 interest-free overdraft facility.
Financial service providers have been told they should take what steps they can to provide support to struggling customers and work with them to reduce their debt repayment amounts where necessary.
“The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus,” said Christopher Woolard, interim chief executive of the FCA.
Debt help charities have welcomed the decision to allow debtors an extra degree of breathing space in the context of the ongoing coronavirus pandemic.
“The extension of payment holidays for credit cards, overdrafts and other forms of consumer credit will come as a huge relief for the many thousands of households struggling to keep up with credit repayments during this pandemic,” said Richard Lane from StepChange.
However, the charity has said it nonetheless fears for the financial futures of millions of people if protections from creditors are suddenly taken away at the end of October.
“Our own research has found that 4.2 million people have borrowed to make ends meet since lockdown began, storing up a tsunami of £6 billion of debt that is set to worsen if left unchecked,” said Mr Lane.
“The government needs to build up dedicated hardship funds for those forced into debt thanks to Covid-19,” he added.
“In the long-term, more viable alternatives to high cost credit must be made available to prevent those on the lowest incomes falling into a debt spiral.”