Consumer credit support

Supporting credit card and personal loan customers through Covid-19 payment difficulties 

Lenders are committed to supporting customers throughout the Covid-19 pandemic.  

Since April 2020, working with the Financial Conduct Authority (FCA), lenders have provided payment deferrals. These are sometimes also referred to as ‘payment holidays’ and were in response to the sudden financial impact of Covid-19 on personal finances. Under the latest FCA guidance, you are able to apply for a payment deferral, across many types of credit, up to 31 March 2021. 

Where support is required, but you have already received payment deferrals for a total period of six months, or your credit card or personal loan provider does not believe that a further payment deferral is in your interests, they will instead provide a range of tailored support, which will be more appropriate to your individual circumstances. This tailored support is often also referred to as forbearance. 

If you are concerned about your finances during this time, it is essential that you contact your credit card or personal loan provider before you miss a payment. You can do this through your mobile or online banking services - telephone services are also available, but it may just take a little longer to get through. Your credit card or personal loan provider’s website will also be updated with the latest information, including FAQs, which should answer most queries. 

This page covers both credit cards and personal loans. For ease of reference, we refer to firms who provide such products as ‘providers’.  

  1. What is a payment deferral? 

This is an arrangement where a provider allows a customer to make no monthly repayments, or a partial payment, for a period of up to three-months, without being considered as being in arrears.    

  1. Will I be eligible for a payment deferral? 

Customers who have experienced, or expect to experience, a short-term financial impact as a result of coronavirus can request a new payment deferral, or can be considered for an extension to a previously granted deferral. 

Where your provider does not believe that a payment deferral would be in your interests, they will consider whether a lesser term, or a partial deferral, might be more appropriate. 

They may also consider whether any other tailored support options would be more suitable and helpful for you, given your overall financial circumstances.     

  1. Will I still get charged interest if I take a payment deferral, or if I’m receiving more tailored support from my provider? 

This will normally be the case where you are benefitting from a payment deferral. Your provider will advise you of its policy.  

Because the amount you owe will not reduce during the payment deferral period, you will need to consider whether it is the right option for you, especially if you are taking a further deferral, or taking similar payment breaks on other products. This is because the amount you will owe at the end of the deferral will have increased because of interest that has been applied. You should consider your options carefully and, if you can afford to continue making your payments, you should do so, as this will keep down your overall cost of borrowing.  

Where you are receiving tailored support, your provider will explain what this means in terms of interest charges and will depend on the type of support that has been provided and your circumstances. 

  1. I am currently employed and able to afford my repayments and there is nothing to indicate that my situation will change, but I am nervous about the state of the economy. Should I take a payment deferral just in case? 

In these circumstances, a payment deferral will not be right for you. Where you can afford to make your credit card payments, you should continue to do so, as this will keep down your overall cost of borrowing.        

  1. Why might my provider have refused to give me a payment deferral? 

Your provider will have assessed your request and concluded there was a reason why this was not considered to be in your interests. They will explain this to you and, if they believe you need a different type of support, they will let you know how else they can help. You may also be referred to independent debt advice.    

  1. I’m currently on a payment deferral and my provider has written to me asking me to speak to them, or to go online, to answer some questions. Do I have to do this and what will happen if I don’t? 

This is a really important part of the payment deferral process. Providers want to understand whether you can now resume your payments, or whether you need tailored support because you may be experiencing longer term financial difficulties. It is essential that you engage with your provider to answer these questions accurately. It might be that you require a further deferral period, which you will be able to request provided you have not already had six months of deferred payments. Engaging with your provider will enable you to make this request. 

If you decide you do not wish to provide this information, your provider will assume you are able to resume your regular contractual payments. If you do not speak to your provider and then go on to miss your contractual payment at the end of your deferral you will then not be eligible to take a deferral even if you have not yet had six months of payment deferrals. 

  1. How long do I have to apply? 

If you have not yet had a payment deferral, or have had a deferral for less than six months and you now believe you need one, you can apply up to 31 March 2021.   

If you are already on a payment deferral at or after 31 March 2021 and you have not had six months payment deferrals in total, you can continue to request a further deferral to run consecutively with the end of your existing deferral after 31 March. All deferrals will however need to end on 31 July 2021, whether or not you have had a total of six months of deferrals. 

  1. I’ve already had six months of payment deferrals, what support is available to me?  

If you have already taken six months of payment deferrals, but still require support, providers will offer other tailored support options.  This is often referred to as forbearance and will help to manage any payment difficulties you may have resulting from Covid-19. This can be short or longer term support, depending on the circumstances and can include: 

  • accepting reduced payments for a further short period where your circumstances are expected to improve 

  • accepting reduced payments via a longer-term repayment plan where you are experiencing more severe financial difficulties 

  • considering whether the refinancing of the outstanding credit at a sustainably affordable payment rate is an option which will be in your interest. 

Providers will explain to you what the tailored support being offered means, including whether contractual payments on the account would be considered to be in arrears. They will also explain how this will be reflected on your credit file. 

  1. Would I lose my credit card promotional rate if I took a payment deferral?  

No, this should not happen. Your provider will advise how this will work.   

  1. Are all providers offering payment deferrals?  

Yes, all providers are doing so. However, depending on your financial circumstances, some may offer alternative types of support to help their customers through these difficult times. They can explain this to you.  

  1. How can I get information and how do I apply for the payment deferral? 

Your provider will advise you how you can request a new payment deferral, or an extension to one that was previously agreed. Try to look online in the first instance, if you can, as telephone lines are still very busy. The online processes have been designed to be straightforward and so could also save you time.     

It is really important that you do not cancel direct debits before you have been advised by your provider that a payment deferral has been granted. 

  1. How long will my provider take to process my application? 

Providers are doing their best to support customers during these difficult times. However, the impact of coronavirus has also affected their own staff and requests for payment deferrals will be dealt with as quickly as possible. We would encourage you to apply online where possible.  

  1. I am not up to date with my payments, will I be eligible for a deferral? 

You should apply to your provider as soon as possible. Being in arrears does not automatically mean you will not be entitled to a deferral, but this may be an indication that you need more tailored support. Your provider will be able to advise you further. 

  1. Will taking a payment deferral, or more tailored support, have an impact on my credit file? 

During the payment deferral period, the monthly payments you do not make will not be reported to credit reference agencies as a worsening arrears. However, it is important to be aware that credit files are just one factor that providers use when making lending decisions. They may use a wide range of other information, including for example by reviewing your bank statements and through an assessment of your overall use of credit products and levels of borrowing.  

Where you require further tailored support, this will be reported on your credit file in line with your provider’s standard policy. This may, for example, include indicating where a reduced repayment arrangement has been agreed with you. This helps to ensure that an accurate reflection of your circumstances is recorded at the credit reference agencies, giving other users of that information a more complete picture. 

  1. I received a payment deferral for three months but have now received a ‘notice of sums in arrears’ (NOSIA) from my bank telling me I’ve missed a payment that was due during my payment deferral. What should I do? 

Your provider may have informed you up front that this may happen and what you should do. If you are unsure, you should contact your provider.  

  1. Can I still use my credit card? 

Being granted a payment deferral will not automatically impact on your ability to use your credit card. However, card providers are able to suspend card use in accordance with their usual business practices. They will advise you if they need to do this and also what to do if you feel you need to continue to use the credit card for essential living expenses. 

If you are now receiving more tailored support, your card provider will advise you whether it is still possible to use the credit card, which will be dependent on the type of support being provided and your overall circumstances. 

  1. Where can I get more general debt advice? 

If you feel that you need debt advice because for example, you have a number of unmanageable debts across a number of lenders, you should not delay getting help – the sooner you have a clear picture of your options, the quicker you can start to manage things.  

The Money Advice Service provides information on free and impartial debt advice. This includes organisations that can provide online support, as telephone and face-to-face advice services are very busy at the present time.  https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator   

  1. I’ve received letters about being in ‘persistent debt’ on my credit card - can I still have a payment deferral? 

In these circumstances, you may still be eligible for a payment deferral and your provider will be able to advise you on what is available in your situation.