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Andyorch

Coronavirus: UK watchdog proposes payment freeze on credit cards and loans

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Lenders could be urged to offer a temporary freeze on loan and credit card payments, targeted at struggling borrowers affected by the coronavirus and its economic fallout.

The Financial Conduct Authority (FCA) announced on its website on Thursday it is likely to issue new guidance to banks and other lenders to give customers a three-month payment freeze.

A package of measures set out by the regulator include ensuring all overdraft customers are “no worse off” on price compared with before recent overdraft changes came into force.

It may also order companies to charge no interest on existing arranged overdrafts of up to £500 ($620) for up to three months for customers affected financially by the pandemic.

Customers benefiting from such temporary measures would not have their credit rating affected.

 

 

https://uk.yahoo.com/finance/news/credit-card-loan-pay-credit-cards-holiday-freeze-uk-banks-rules-coronavirus-072430171.html


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However – don't forget that a freeze on payments does not mean a freeze on interest.

In other words, if you owe money and you take advantage of the freeze on payments, then that you won't be hassled for payment or markdown on your credit file – but on the other hand the unpaid money will carry on gathering interest so although it's a payment holiday for you – it's not an interest holiday – and the banks are still quids in. Surprise surprise.

Also, what is not at all clear is whether if you use your interest free payment period on your credit card and you don't clear the balance, is it going to continue to be interest free? This doesn't seem to have been noticed – and I suspect the answer is that although you won't be hassled for the payment, you will still have to pay interest as you didn't clear your monthly balance during the interest free period.

Needs checking – because I'm not sure. It's my cynical view – but I cannot imagine that the banks are really making that kind of sacrifice.

Be careful out there!


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