LONDON (Reuters) – Britain’s markets watchdog on Friday proposed enabling some consumers to extend a payment freeze on their credit cards by a further three months as part of measures to support borrowers in difficulties because of the coronavirus crisis.
The extension to the payment holiday, which was introduced in April, would also enable some consumers to ask for a reduced interest rate on any overdraft borrowing above 500 pounds.
Those who have yet to ask for a payment freeze on credit cards or for an interest-free overdraft of up to 500 pounds ($620) could seek one until Oct. 31, the Financial Conduct Authority (FCA) said in a statement.
“The proposals … would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus,” said Christopher Woolard, the FCA’s interim CEO.
“Where consumers can afford to make payments, it is in their best long-term interest to do so; but for those who need help, it will be there.”
Sarah Coles, personal finance analyst at fund supermarket Hargreaves Lansdown (LON:HRGV), said the new proposals would make it harder for some borrowers to obtain a further payment freeze because of the restriction on those deemed able to resume payments.
“This feels like a blow to borrowers, but it’s actually a very sensible move, designed to protect people from a nightmare further down the road. Putting off repayments will build up the interest you’ll eventually have to pay.”
Guidance for other forms of borrowing, such as auto finance, pawnbroking and payday loans, will be updated soon, the FCA said.
The watchdog is seeking comments on the guidance until 1600 GMT on June 22 before issuing its final guidance.