Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the FCA’s decision to extend help for customers in debt:
“The coronavirus crisis is going on much longer than many expected so it’s wise that the FCA plans to extend the help for those struggling to pay their debts. The move means that those who are already getting help can extend that and those who have yet to apply can still do so until the end of October.
“People will be dismayed that the FCA has chosen not to extend its changes to the overdraft market, which effectively delayed the huge hikes in overdraft interest that were due to come in as a result of the regulator’s rule changes. In the previous Covid-19 support scheme the regulator said that no one should be charged more for their overdraft during the current crisis, as many borrowers faced the prospect of interest rates rising to 40% or more. However, the regulator has not extended this support, meaning those who are taking on more debt at such a difficult time could be hit with a massive hike in costs. Borrowers can request a £500 interest-free overdraft but anyone with borrowing over this sum will need to contact their bank to negotiate a reduction in interest or charges. The move leaves many borrowers out in the cold at a time when many are relying on their credit cards just to pay for bills and essentials each month.
“The real effects of the impact of the current crisis on people’s finances won’t be seen until the Government starts to scale back the furlough scheme, at which point job losses are expected to rise and more people will find themselves in financial difficulty. Considering one-fifth of the population has already taken on debt in order to pay for essentials* during the crisis it’s not hard to see how millions of people will find themselves struggling financially before the pandemic is over. As such, it’s not hard to see how the FCA might choose to extend this package of help further, depending on how quickly the country emerges from the current crisis.”
* Based on nationally representative research of 2,002 adults in the UK by Opinium and AJ Bell.
