Britain’s financial regulator, the Financial Conduct Authority (FCA), has confirmed that borrowers will be able to seek payment breaks of up to six months on credit cards, car finance, mortgages, personal loans, and pawned goods.

Those with short-term credit such as payday loans can defer for one month.

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The payment holidays are parts of new emergency measures designed to support individuals and households that will be affected by the second round of tougher Coronavirus restrictions.

The government has announced new national restrictions effective 5 November

People will be required to stay at home, except for specific purposes. No gatherings with people of a different household will be allowed, except for specific purposes. And certain businesses and venues will be closed.

“These new measures have been carefully judged to achieve the maximum reduction in growth in the number of cases, preventing the NHS from being overwhelmed, whilst ensuring that schools, colleges and universities stay open and that as many people as possible continue to work,” according to the guidance.

What are the FCA’s proposals?

The FCA is proposing to extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of coronavirus.

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This will mean that:

  • those who have not yet had a payment deferral will be eligible for 2 payment deferrals of up to 6 months in total
  • those who currently have an initial payment deferral, will be eligible for another payment deferral of up to 3 months
  • those who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to 3 months

“It’s important that borrowers who can afford to make repayments continue to do so”

The FCA is urging consumers not to contact their lender until the enhanced measures are in place. Lenders will soon provide further information.

Under the FCA’s proposals, borrowers would have until 31 January 2021 to request a payment deferral.

A payment deferral under these proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.

The FCA is also proposing that no one will have their home repossessed without their agreement until after 31 January 2021.

Not everyone will be eligible for a payment relief

Some borrowers would not be eligible for a payment deferral, including because they:

  • have already had 2 payment deferrals (of up to 6 months in total), and tailored support will be more appropriate to their circumstances
  • have agreed alternative support with their lender

Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case.