The FCA has this week provided additional information around the support available for customers of certain credit products when they come to the end of a payment break.

These measures outline the options firms will be required to provide to credit card, other revolving credit, and personal loan customers who are coming to the end of an agreed payment break, as well as customers who have an agreed an arranged interest-free overdraft of up to £500.

Customers will have until 31 October 2020 to request a payment break or arranged interest-free overdraft of up to £500.

For credit card, store card, catalogue credit, and personal loan customers

Coming to the end of a payment break

Lenders will get in touch with customers to explain what will happen when the payment break ends. For customers who can afford to resume payments at the end of a payment break, it is in their best interest to do so and their lender will work with them to find the best way to catch up on missed payments. However, if a customer is not yet able to restart payments, they should let their lender know. Lenders may offer another 3-month payment break or another option depending on the customer’s circumstances.

Cancelling a customer’s credit card, store card or catalogue credit

It’s important to note that under the FCA measures, lenders are not prevented from cancelling a customer’s credit card, store card, or catalogue credit. However, if the customer depends on these products to pay for essential items and living expenses such as mortgage, rent, council tax, or food and utility bills, then they should let their lender know as soon as possible.

Impact on a customer’s credit file

When temporary measures such as payment breaks were first announced, the FCA stated that firms should not report a worsening status to customers’ credit files as a result of taking a payment break. However, it is important to highlight that this does not mean a customer’s credit file will not change during this period as files are impacted by a range of factors. Lenders should provide customers with information on the potential impact on their credit file of taking a payment break. Credit files will only be protected for the duration of the payment break, so missed payments outside of an agreed break will likely have a negative effect on a customer’s credit file.

 

For overdraft customers

 

Customers that already have an arranged overdraft

Customer that already have an arranged overdraft can ask their current account provider for up to £500 of overdraft borrowing with no interest for 3 months, and can also ask for support above this amount if they need it. Support will vary between banks. Customers can request this support by 31 October 2020, and if they have already received it, can request another 3 months.

 

Full information on guidance can be found on the FCA’s website.

The FCA is also updating guidance on other credit products, which will be available soon.