Interactive Investor

FCA extends credit card freeze until October

Customers still experiencing temporary payment difficulties because of the coronavirus pandemic will be …

1st July 2020 10:41

Stephen Little from interactive investor

Customers still experiencing temporary payment difficulties because of the coronavirus pandemic will be able to request up to £500 interest-free for a further three months

Credit card customers hit by the coronavirus pandemic will get additional support once the three month payment freeze comes to an end, according to the Financial Conduct Authority (FCA).

Measures introduced in April to give struggling consumers a payment freeze on loans and credit cards were due to end this month.

The FCA has told firms to contact customers coming to the end of the first payment freeze to find out if they can resume payments and agree a repayment plan.

Firms will have to provide customers still facing payment problems with support, which could include freezing or reducing payments on their credit card and personal loans to a level they can afford for three months.

Customers still experiencing temporary payment difficulties because of the coronavirus pandemic and have an arranged overdraft on their main personal current account will be able to request up to £500 interest-free for a further three months.

Firms will also have the offer lower rates on lending above the interest-free buffer.

Customers that have not requested a payment freeze or an arranged interest-free overdraft of up to £500, will have until 31 October 2020 to apply for one.

Christopher Woolard, interim chief executive at the FCA, says: “Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic.

“For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.”

What about overdrafts?

The FCA confirmed it will not be extending temporary guidance on how much banks and building societies can charge for overdrafts during the pandemic.

New rules were introduced on 6 April which mean banks and building societies are no longer be able to charge higher interest rates on unarranged overdrafts than they do on arranged ones.

This resulted in many lenders hiking overdraft fees up to nearly 40%.

After the FCA issued a warning that these charges would be unfair on borrowers, most lenders decided not to increase their rates. Now this no longer applies, banks will be able to revert back to these new interest rates.

Will a payment freeze affect your credit score?

The FCA says the credit scores of consumers using any of these temporary payment freeze measures will not be affected.

The UK’s three biggest credit checking agencies have said that anyone who takes a payment holiday will be protected.

Experian, Equifax and TransUnion have agreed an 'emergency payment freeze', meaning credit scores will not be affected during any payment holiday agreed with your bank or lender.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

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