Coronavirus and your debts
FCA temporary measures
The FCA has announced measures, such as a payment freeze, to help customers in temporary financial difficulty because of coronavirus. You can apply for support outlined below from 25 November 2020.
Payment holidays will not be recorded on your credit file. However, there may be other ways for potential lenders to find out you had a payment holiday, for example by looking at bank statements.
The sections Payday loans, Motor finance and Buy-now-pay-later, rent-to-own and pawnbroker debts give detail of the help available. If you have already had the payment freezes detailed in these sections, or if you expect your financial difficulties to be long term, you should contact your lender now to discuss your situation and what support is available.
Lenders are expected to do the following under current FCA guidance for tailored support:
- provide tailored support which reflects your individual circumstances. This includes providing support before you miss a payment if you are approaching the end of a payment holiday;
- offer a range of shorter and longer-term options;
- not pressurise you into repaying your debt in an unreasonably short period of time;
- put in place an affordable repayment arrangement which takes into account your wider financial situation, including other debts and essential living expenses; and
- suspend, reduce, waive or cancel any interest, fees or charges to prevent your balance escalating after a repayment arrangement has been agreed.
If you require support after a payment holiday has ended, this will be reflected on your credit reference file. Lenders should be clear on how any repayment arrangements will be recorded on your credit reference file.
Step Change Covid Payment Plan (CVPP)
If you have already had payment holidays but still can’t afford your full payments, a CVPP may be an option. Contact us for advice.
If you have a payday loan, the availability of a payment freeze has been extended. However you must apply before 31 March 2021.
- If you have not yet benefited from one, your lender should allow you a one-month payment freeze.
- No interest will be added during this payment freeze.
- The payment freeze will not affect your credit file.
If you have already had a payment freeze and are unable to make up the deferred payment please see our Payday loans fact sheet and contact us for advice.
Buy-now-pay-later, rent-to-own and pawnbroker debts
If you have any of these types of lending, the availability of a payment holiday has been extended until 31 July 2021. However, you must apply before 31 March 2021.
- If eligible you can ask for payment holidays of up to six months in total. Payment holidays can be requested up to three months at a time.
- If you have already benefitted from a payment holiday, you can request a further holiday up to a maximum of six months.
- The payment holiday will not affect your credit file.
- Interest will continue to be added during the payment holiday.
After the payment holiday ends, you should be allowed to repay the deferred payment in an affordable way.
If you have been granted a payment holiday, the firm should extend the redemption period for that item. If the redemption period has already ended, the firm should agree not to sell the item and suspend any sale for the payment deferral period.
If you are having payment difficulties due to coronavirus but have not been granted a payment deferral, the firm could still consider extending the redemption period. If the redemption period has already ended, the firm could still agree not to sell the item and suspend any sale. The firm can take these steps if they think it is likely that you will still be able to recover the item.
Buy now pay later
If you have been granted a payment holiday and your agreement is within its interest-free promotional period, this should be extended to cover the period of the payment holiday.
Rent to own
If you have been granted a payment holiday, firms should continue to allow you to rely on insurance and warranties during the payment holiday or extended agreement.
If you have motor finance, the availability of a payment holiday has been extended until 31 July 2021. However, you must apply before 31 March 2021.
- If you were up to date until coronavirus caused you temporary difficulty in paying, you should be given a three-month payment break if this is the best option for you. You may still be asked to make a token payment of £1.
- If you have already been given a three-month payment break, you can ask for another payment break of up to three months. You can still ask for your second payment deferral after 31 March 2021, but your payments cannot be deferred beyond 31 July 2021.
- This should not affect your credit files unless you need more help, for example, if interest on the payments needs to be frozen. Potential lenders may still be able to find out that you didn’t make these payments as originally agreed in other ways though, for example, by looking at your bank statements.
- Until 31 January 2021, your lender should not normally repossess goods if they know that you need to use them and are only experiencing temporary financial difficulty because of coronavirus. From 31 January 2021, lenders will be allowed to repossess goods and vehicles, but only as a last resort.
Bank debts and other lending
The FCA has issued several pieces of guidance for requesting a payment holiday if you are affected by coronavirus and struggling to pay your credit debts. The most recent guidance applies from 25 November 2020.
Personal loans, credit cards, store cards, catalogues
- If you have been affected by coronavirus and have not yet had a payment holiday, you are entitled to a six-month payment holiday.
- If you’ve had a payment holiday previously or are currently on a payment holiday, you will be able to extend up to a total of six months.
You have until 31 March 2021 to ask your lender for a payment holiday. After this date, you may also be able to extend your existing payment holiday up to 31 July 2021. However, you cannot go over the six-month limit that the FCA guidance allows.
The payment holiday will not be recorded on your credit file; however interest will continue to be added.
If your payment holiday has ended and you can afford to make your regular payments again, do so. You may also need to discuss how you are going to repay any missed payments with your lender.
If you have already had a total of six months payment holidays and you are still unable to afford the payments, contact your lender as soon as possible. Discuss your situation and ask what options are available. Ask your lender how this will affect your credit file.
FCA guidance says that your lender:
- should take your circumstances into account when discussing a repayment arrangement;
- should not pressurise you into repaying your debt in an unreasonably short time; and
- should recognise vulnerability and respond to the needs of vulnerable customers.
For more information, see the FCA’s Coronavirus and Consumer Credit: Tailored Support Guidance.
Under FCA guidance, banks are expected to contact overdraft customers who have received temporary support to determine if they still require assistance. If you need further support or if you ask your bank for help for the first time, the bank should:
- provide tailored support such as reducing or waiving interest;
- agree a programme of staged reductions in the overdraft limit; or
- support you to reduce your overdraft usage by transferring the debt.
Your bank should not reduce your credit limit or suspend or remove an overdraft facility if that reduction, suspension or removal will cause you financial hardship.
Other bank debts
If you are struggling to pay unsecured bank debts that are not covered by the new FCA measures, you can still contact your bank to explain your situation. Each bank will consider what help it may give on a case by case basis. Go to their website to see what help is available. You can also call your bank, but be aware that you may have to wait some time.
Ask your lender how any arrangement that you agree will affect your credit file.
Some banks are also allowing people to access their fixed-savings accounts without a penalty. Contact your bank, explain your situation and see how they can help.
Avoid taking out more credit unless you know that you can afford to pay it back.
If you have debts which are now unaffordable, contact us for advice. While you are waiting to get the advice that you need, you can send your creditors a letter asking them to hold action on your account due to coronavirus.
Magistrates' court hearings
Magistrates' courts are limiting the number of cases that are being heard. If you have been told to attend a magistrates' court hearing, it is important that you attend. However, to avoid an unnecessary journey, we suggest that you contact the court that is dealing with your case to check whether your hearing is going ahead.
If you have questions about an outstanding magistrates' court fine, you should contact the National Compliance and Enforcement Service by emailing NCESBCT@justice.gov.uk or by calling 0300 123 9252.
The rules which bailiffs have to comply with have been updated due to coronavirus. While the coronavirus lockdown restrictions are in place during the ‘emergency period’, bailiffs are not allowed to take control of goods at residential premises or on highways.
Bailiffs will be allowed to visit residential premises and resume normal enforcement activity from 6am on 23 August 2020, as the ‘emergency period’ will come to an end.
In England, legislation was introduced on 17 November 2020 that stopped bailiffs taking control of goods inside residential premises until 3 December 2020.