What’s Happening in the UK Consumer Credit Market?
Personal finances are under considerable pressure given the turmoil caused by the Covid-19 pandemic. There is great uncertainty for consumers and lenders alike. On the one hand the Financial Conduct Authority (the body who oversee the consumer credit market in the UK) has instituted a number of measures to help alleviate pressure on borrowers. On the other lenders see so much uncertainty that many have temporarily stopped lending for fear of a dramatic increase in arrears, defaults and bad debts.
The FCA’s measures to help consumers include:
- Personal Loans and Credit Cards
- Motor Finance
- Forms of credit with a high APR%
These measures focus on “forbearance” – i.e. they require lenders to behave in a way that recognises the impact of the pandemic on borrowers’ short term cash flows and their ability to make repayments on time. Lenders may be required to suspend/reduce/waive interest payments, offer a more flexible repayment plan and defer payment of sums already in arrears.
If you are having or foresee you will have problems meeting current debt obligations you should contact your lender as soon as possible.
What’s Happening at Now Loans?
Now Loans works primarily with lenders who hope to help people who already have credit problems. Even though our lenders specialise in dealing with risk there is more risk at the moment than they can accommodate. So, at the moment all our lenders have temporarily suspended all lending.
As you’ll be aware we are in a very dynamic situation. However, what is certain is that lenders will need to be much more confident about the direction the credit markets and the economy are moving before they open up lending again. We hope that we’ll see some positive moves from at least some of our lenders during the summer.
What to do if Coronavirus has Impacted Your Income
Have you been required to take time off work? Have you been furloughed? The Money Advice Service has put together some useful information covering your rights and what you’re entitled to receive if you’re employed or self-employed.
The UK Government’s Coronavirus Job Retention Scheme aims to pay employed people while not working (i.e. “furloughed”). This pays 80% of retained workers’ salaries up to £2,500 a month backdated to 1st March 2020. Find out more about this and other government support initiatives here.
A similar scheme has also been set up for the Self-Employed. Find out more here.
The Government has introduced changes to Statutory Sick Pay (SSP) for people obliged to self-isolate. During the pandemic, SSP will be paid from the first day of illness rather than the normal fourth day. You’ll also be able to claim SSP if you’re needed to care for someone in your household that has been told to self-isolate.
SSP is £94.25 a week and can be paid up to 28 weeks. To be eligible for SSP you need to earn at least £118 a week. However, if you’re not eligible for SSP you can instead claim Universal Credit or Employment and Support Allowance.