British banks granted 1.5 million credit and loan payment holidays | Banking


UK high street banks have given nearly 1.5 million payment holidays to consumers struggling to repay their credit cards and personal loans during the coronavirus pandemic.

Figures released by the UK Finance banking lobby show that as of May 21st, 877,800 credit card accounts had been frozen. The monthly repayments of 608,000 personal loans were suspended until then.

With job losses and wage cuts for millions of workers across the country, the risk of financial hardship facing UK households increases dramatically.

According to estimates by the Bureau of National Statistics, almost one in five people saw a decline in household income in the first full month of the lockdown in April. The number of people claiming unemployment benefits rose nearly 70% to around 2.1 million, an early sign of increasing job losses across the UK.

Credit cards and loans are offered a payment vacation for up to three months in accordance with guidelines from the Financial Conduct Authority, the city’s watchdog. Mortgage repayment holidays can also be applied for until the end of October; around 1.8 million have been approved so far.

The latest snapshot suggests that relatively few people have been granted payment leave – possibly because the government’s work leave program helps maintain family income. Less than 2% of the UK’s 51 million credit card accounts are paused and less than 7% of loan payments are frozen.

However, UK Finance said the number of payment holidays had grown rapidly, increasing by more than a quarter since early May.

Carl Packman, director of corporate engagement for the Fair By Design campaign, which advocates fairer lending to consumers, said payment holidays urgently need to be extended to help troubled households.

“Banks and their regulators have acted exceptionally quickly to provide clarity and support to customers during this time, but unfortunately we expect the situation to get worse before it gets better.

“The FCA must therefore expand its support package for consumers and protect against unintended consequences.”

Household debts on credit cards and loans, as well as car finance, had increased before the coronavirus outbreak. Damon Gibbons, director of the Center for Responsible Credit, said some lenders are more flexible with consumers than others. “As a result of all of this, there will be a lender lottery,” he said.

“We were in the midst of an escalation in household debt problems before the pandemic and this will tip a large number of people over the edge, be it living on 80% of their wages on vacation or looking forward to the job market is shaken. “. People will be in real trouble. ”

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