Credit card borrowers to get extra coronavirus payment ‘holiday’

Credit card borrowers struggling to pay their bills during the coronavirus lockdown will be offered a further "holiday" from repayments as banks and financial regulators prepare for the next wave of financial distress when the government's furlough scheme winds down. More than 1.6m payment holidays -- including 961,700 for credit card holders -- have already been agreed by lenders providing consumer debt. But bankers are now concerned about mounting financial problems among customers due to widespread job losses anticipated in the coming months.

The Financial Times revealed last week that the Financial Conduct Authority and banks were in talks over the move, which comes after the government gave an additional three month repayment holiday for up to 1.8m mortgage holders. The FCA on Friday confirmed proposals to provide similar support for borrowers using credit cards and store cards, as well as personal loan customers coming to the end of a payment freeze. Eric Leenders, managing director for personal finance at UK Finance, the banking trade body, said: "The banking and finance industry has a clear plan to help the country through these tough times and is committed to providing ongoing support to those customers who need it."

Customers that need a payment freeze or an interest-free overdraft of up to GBP500 will now be able to do so until the end of October, bringing the support into line with the conclusion of the government furlough scheme. Banks have so far offered 27m interest-free overdrafts to struggling borrowers. For those who have already used the scheme and are still experiencing difficulties due to coronavirus, banks will offer either a further payment deferral or reduced payments to an amount the customer can afford for a further three months. Christopher Woolard, interim chief executive at the FCA, said: "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."

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However, borrowers will not be offered a blanket extension, with banks needing to assess whether repayments can be made and whether borrowers will be worse off after the holiday.

The FCA and bank executives have told borrowers that they should make payments if they can given the risk of high bills in the future as interest continues to be charged through the period.

"These loans and cards can come with hefty interest rates, so putting off repayments will build up the interest you'll eventually have to pay, creating an even bigger debt mountain to climb when you're back on your feet," said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

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