Dear Iona,
Dear Asif,
I’m pleased to say that you ARE entitled to help – especially as you work in a sector that has been hard hit by COVID-19.
The government has ordered lenders to offer a temporary payment freeze on credit cards and on personal loans – initially for three months – to anyone in difficulties.
You’ll have to apply to your lenders and make sure your request is confirmed before assuming you can miss payments. This might seem tricky as banks are being inundated with queries right now but as long as you keep a record of when you first made contact, you should be in the clear. Firms have also been told not to suspend anyone’s card during the emergency.
Banks are being inundated with queries so keep a record of when you make contact to stay in the clear
If you’ve been getting letters about long-term debt – known as ‘persistent debt notices’ – the breathing space for getting things sorted has been extended to 1 October.
As far as an overdraft is concerned, all banks were supposed to replace daily or monthly fees with a single interest rate this month. But now, the regulator (aka the Financial Conduct Authority) is forcing banks to ensure that “all overdraft customers are no worse off on price” than they were before these changes come in.
So if you have been running a smallish un-arranged overdraft, those massive fees you pay will come down dramatically. And if you have a bigger overdraft, the pain of higher fees will be delayed.
If you are someone who dips in and out of the red, you’ll be relieved to hear that the government has told banks they must offer people in difficulties a £500 interest-free buffer for three months.
The regulator has also said that anybody using these temporary overdrafts or other measures should not have their credit rating affected in any way. So you don’t need to worry that any lifeline thrown to you now will damage your borrowing prospects in the future.
Any lifeline thrown to you now won’t damage your future borrowing prospects
The banks have been told by the government to do the right thing. So if you are seriously worried about your overdraft, they should also offer you options such as converting the repayments into a loan, or even freezing interest. You’ll have to ask nicely – it’s not a right. Those working in sectors materially affected by the economic shutdown should be able to make a compelling case, and I urge you to get in touch with me, Asif, if you run into any problems.
Those directly affected by the shutdown should be able to make a compelling case for forbearance
Council tax is another area where you need to show you are worthy of ‘hardship’ funding. The government is providing £500m for a Hardship Fund for councils to support those who need it most. If you are accepted, it could cut your bill by £150 a year. If you pay less than that already, you’ll pay nothing this year anyway.
Some local authorities are allowing council tax payments to be delayed for three months – so it’s well worth checking.
Help with energy bills seems to be concentrated on people with prepayment meters. If you’re on a prepayment meter and can’t top up the credit, you should ask your supplier about your options. This could include nominating a third party for credit top-ups, having a discretionary fund added to your credit, or being sent a pre-loaded top-up card.
But the industry has also said that any energy customer in financial distress should be supported by their supplier. That could include debt repayments and bill payments being reassessed, reduced or paused, and there will be no disconnection of meters.
I’ll be thinking of you Asif!
