Covid-19 financial support extended for more credit products

Customers who haven't yet applied for payment freezes for their credit products can request a freeze up until 31 October 2020.

Those who have already asked for support from their lenders can request further support, although this varies depending on the product they have.

At the same time, the Financial Conduct Authority (FCA) has reminded customers that it's in their best interests to resume normal payments if at all possible.

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Extended support

This latest guidance issued by the FCA follows the measures brought in back in April when firms were told they should offer payment freezes to customers if requested.

Under the new guidance, customers who haven't previously requested support can access the following:

• Motor finance payment freeze of three months
• Buy-now pay-later (BNPL) payment deferrals of three months, including the extension of promotional periods by three months if necessary
• Rent-to-own (RTO) payment deferrals of three months, although insurance and warranties might not be covered for the extended period of the credit agreement and firms must make customers aware of that
• Pawnbroking agreement extension of three months, so the item cannot be sold during the payment deferral period
• High-cost short-term credit (HCSTC) and payday loan customers can request an interest-free payment freeze of one month

Along with this, customers who have already received support from their lender but are still struggling can ask their lenders for further payment freezes or reduced payments.

For customers of HCSTC and payday loan products, it's worth noting a payment freeze can only be applied for a single month up to 31 October 2020 for each different product they have. However, firms must still provide support in line with FCA guidance.

The guidance comes into force from Friday 17 July.

Resuming payments

If a customer is coming to the end of a payment freeze, lenders are expected to contact them to discuss whether they can resume full or partial payments.

A plan will need to be agreed about how the missed payments can be repaid, whether that's over a few months or longer.

The FCA is clear that, while they expect firms to continue to support customers struggling with their finances due to coronavirus, it's in customers' best interests to resume some level of payment as soon as they can.

This will help avoid larger monthly payments later, especially in the motor finance sector where a payment freeze on an agreement set to expire in 12 months could hugely increase their monthly obligations when the freeze comes to an end.

Even if customers can only agree partial repayments in the short-term, it will help lower their potential payments further down the line.

Other credit products

This updated guidance for customers in the motor finance, BNPL, RTO, pawnbroking and HCSTC sectors mirrors that offered across other credit products.

It was confirmed in June that credit card and loan customers can seek a payment freeze of three months up until 31 October 2020, and further freezes and payment reductions must be offered to those who have already accessed payment freezes if they need continuing support.

Customers with arranged overdrafts can request a further three-month extension on an interest-free portion of £500 and banks may consider lower interest rates and repayment plans.

Insurance customers can also request payment deferrals under guidance issued in May, although it hasn't yet been announced if those measures are to be extended.