The UK’s financial watchdog has told lenders to offer special support to customers struggling to repay debt as a result of the coronavirus.
The Financial Conduct Authority (FCA) on Wednesday issued fresh guidance to firms, calling for “a tailored package of support” for any customers struggling with debt as a result of the pandemic.
“For those who can restart payments, it is in their best interests to do so,” said Chris Woolard, the interim chief executive of the FCA.
“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.”
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The new guidance applies to store credit, personal loans, overdrafts, and other forms of consumer credit such as car loans and rent-to-buy arrangements.
The new FCA guidance extends previous rules around leniency set down in July. Those existing rules were due to lapse on 31 October. The FCA will review the new rules, which come into force on 2 October, after six months.
The announcement came as a survey of over 2,000 Brits found that over 40% are relying on loans, credit cards, and overdrafts to make ends meet.
Valentine Mulholland, senior policy and propositions manager at the Money and Pensions Service, said the FCA rules would help those in need.
“If people are still struggling with their finances at the end of payment holidays, they shouldn’t suffer in silence,” she said. “It’s crucial they contact the firm to find out what support they can offer, and be aware they don’t have to agree to a repayment arrangement if they cannot afford it.”
Mulholland recommended that those in need contact the government-backed Money Advice Service.
Financial pressures are likely to worsen in the coming months as government support for jobs and companies comes to an end. Economists believe as many as one million people could lose their jobs. Chancellor Rishi Sunak has been frank about the fact unemployment is likely to rise despite new, less generous wage subsidy schemes.
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