Loan and credit card payments to be frozen for three months in UK

BRITISH consumers will receive a three-month freeze on loan and credit card payments to weather the coronavirus epidemic, under plans outlined by the country's financial regulator on Thursday (2).

The "stop-gap" package complements relief measures already announced by the government to support mortgage-holders, furloughed staff, renters and the self-employed. It includes pledges to slash interest rates on arranged overdrafts up to 500 pounds to zero, for up to three months.

The Financial Conduct Authority said it was conducting a brief public consultation until next Monday, and the measures would be expected to come into force by April 9. It will make a further announcement about the measures next week.

"These measures would provide an expected minimum level of financial support for consumers who until now have been financially stable," FCA interim Chief Executive Christopher Woolard said.

"Where consumers can still afford to make payments, they should as normal, and this is likely to be in their best long-term interest to continue to do so."

The guidance would not prevent companies from offering more generous assistance to their customers, and some already are, Woolard said.

The FCA, which supervises banks and credit providers across Britain, also said consumers using any of these temporary measures should not see their credit rating affected.

'BANKING LOTTERY'

The payment freeze on cards applies to credit, store and catalogue cards, allowing customers to request a halt to all payments for three months or to make a nominal payment. The cards would not be suspended during the three-month period.

Customers without an overdraft on their main personal current account are able to request one, the FCA added.

Lloyds Banking Group said it welcomed the FCA's guidance and since the start of the pandemic it has helped thousands of customers using the temporary support measures already introduced.

Martin Lewis, founder of consumer champion MoneySavingExpert.com, said it marked an unprecedented intervention from regulators and would end a "banking lottery" or hitherto patchy help from lenders for customers affected by the pandemic.

"Payment holidays mean exactly what they say - you don’t pay, but you can still be charged interest," Lewis said.

"And with interest rates often high, especially on cards, that can mean storing up trouble for future. Those struggling for cashflow may have no choice, but if you don’t need to do it, don't."