Consumer group, Which? has called for an extension of financial support for struggling British households.
The group said that the protections window, which currently provides support for those struggling to make their usual payments due to the impact of coronavirus should be extended to 31 January 2021.
Which? urged the Financial Conduct Authority (FCA) to take further steps to protect households facing “a potentially disastrous financial cliff edge” when temporary relief measures such as interest-free overdrafts and payment holidays come to an end.
Currently, Britons have until 31 October to ask their lender for temporary support with borrowing such as mortgages, personal loans and credit cards. But borrowers requesting a payment deferral will still accrue interest on the loan and need to pay it off eventually.
In the instance that another deferral is not in the consumer’s best interest, Which? advises lenders to offer wider forbearance options such as payment rescheduling or freezing interest.
The FCA made a “call for input”, in July, seeking views on whether it should extend its current guidance beyond the current October deadline — or provide an alternative form of support.
The regulator said it would publish draft guidance on mortgages in late August and draft consumer credit guidance in September, if responses from their call for input show that further guidance is needed.
Meanwhile, the government’s coronavirus Job Retention Scheme is set to end on 31 October, meaning that some people could potentially start to experience financial hardship later this year.
The group warned that it is in “the best interest” of consumers to repay loans “where possible” as there is likely to be an increase in the number of people falling into financial distress as a result of the furlough scheme ending, who will need to access this support.
Which? is also seeking to see a reduction in timescales for complaints about forbearance, after the group said it saw cases where slow handling of complaints affected consumers’ finances.
A Which? research looking at the scale of financial hardship people are facing, showed that furloughed workers were three times more likely to have defaulted on at least one payment in the past month.
Gareth Shaw, head of money at Which?, said: “The regulator has acted quickly and effectively to help those struggling financially due to the pandemic, but it must be prepared to take further bold action to prevent millions of people from being hit by a perfect storm of financial pressures in the coming months.
“The huge number of payment holidays taken highlights the scale of financial difficulty people in this country are facing – a situation that is likely to become worse as support measures like the furlough scheme come to an end.
“The regulator must treat all consumers fairly – ensuring financial support is still provided to those who need it and also available for those who may face financial problems for the first time after 31 October,” Shaw added.