The FCA have extended payment holiday rules to payday loans – full details revealed

Coronavirus has had such a dramatic effect on the economy that normal financial rules have been completely upended. Rishi Sunak has thus far put laws in place to protect people who are struggling to cover their various bills.


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The FCA went on to extend payment holiday rules to credit card bills, overdrafts and other areas.

These changes were welcomed by consumers and companies alike but today the regulator has added three new measures to the mix.

From today, the Financial Conduct Authority has introduced new measures to protect people struggling with payday loans, motor finance commitments and/or other credit products.

This could be a huge development as payday loans are well known to be a problematic issue for many consumers.

In the full announcement detailed on the website, the FCA confirmed the following changes for “High-cost short-term credit (including payday loans)”:

  • Firms to provide a one month payment freeze to customers facing temporary payment difficulties due to the coronavirus pandemic. No additional interest should be charged to the customer as a result of the payment freeze. This shorter period reflects the much shorter length of most of these loans and the higher interest rates compared to other high cost credit products.
  • The FCA expect firms to use the deferral period to engage with their customers to understand whether they are likely to be in a position to resume payments. Where the customer continues to face payment difficulties we expect firms to provide forbearance in line with our rules. This could include one single payment after the end of the term or by a number of smaller instalments.
  • High-cost-short-term-lenders are also reminded, like all lenders, to consider whether immediate formal forbearance may be more suitable if a customer was already in financial difficulty before the impact of coronavirus. If the consumer expects their financial difficulties to last longer than a month, then immediate forbearance may be more suitable.

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Changes have also been made for other credit products such as RTO, BNPL or pawnbroking agreements.

While the changes were confirmed today, the measures won’t be enforced until April 27.

This gives both consumers and companies some time to prepare for the changes.

Christopher Woolard, the Chief Executive for the FCA, provided the following comments along with the announcement: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”


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Even though the changes have just been announced, several industry insiders have already commented on the measures and some have made suggestions for further changes.

ClearsScore CEO Justin Basini called for the regulator to offer more help for the financially vulnerable: “The FCA’s announcements today to extend payment holidays to cover those using payday loans, car finance and pawnbrokers are much-welcomed policies that will offer relief to those in financial difficulty.

“Whilst the FCA has introduced a range of policies aimed at reducing financial hardship (including three-month payment freezers on mortgages and up to £500 of arranged overdrafts interest-free), offering just one month payment holidays for payday loans and pawnbroker borrowing doesn’t do much to support those in society who are at their most financially vulnerable.

“We would encourage the FCA to work closely with payday lenders to go beyond a one-month payment freeze and instead offer a three-month freeze, not only on payments but on interest accrued during this difficult time.”

James Jones, the Head of Consumer Affairs for Experian, welcomed the changes and urged consumers to communicate effectively with their lenders: “This will provide welcome relief to many people.

“We know the financial impact of the Coronavirus pandemic is a daily worry for many of us – particularly where regular income has been affected.

“By extending the payment freeze to car finance and payday loans, it will give a lot of people some very welcome certainty and comfort.”

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