The Financial Conduct Authority (FCA) has extended the new Coronavirus credit card and overdraft payment break measures to now allow for home credit and guarantor loan payment breaks, meaning greater guarantor loan protection for both borrowers and those who act as the guarantor in the arrangement.
Trust Deed Scotland® – the #1 debt advice company in Scotland welcomes the latest guarantor loan payment break developments. Guarantor loans continue to be one of the most worrisome debt types in Scotland for individuals struggling to repay their debts due to the impact of defaults not only affecting the finances of the borrower but also on that of the guarantor.
The regulatory body had already released proposals for lenders to offer a temporary payment freeze on loans and credit cards for up to three months, but these have been now been confirmed and extended to a wider range of creditors, including guarantor loans.
The FCA has confirmed that it’s going ahead with a package of measures that ensure lenders offer temporary payment relief to customers affected by the Coronavirus outbreak.
The following financial products are now covered:
- Guarantor loans
- Logbook loans
- Home collected credit
- Loans issued by Community Development Finance Institution
- Credit Union Loans (only where these are regulated)
How to Request Guarantor Loan Payment Breaks
Even before the Coronavirus outbreak, if you’ve been sold a guarantor loan in the UK, you may be able to make an affordability complaint for guarantor loans compensation via Resolver.
Resolver is a tool created by MoneySavingExpert that helps with guarantor loan protection for both the guarantor and the borrower and if your loan was unaffordable when it was sold, you’re due a guarantor loans refund of any interest you’ve paid (plus 8% statutory interest).
Guarantor loans are notoriously offered at a higher cost interest rate offered as a last resort, where the guarantor will often pay the debt off on the borrowers’ behalf. You can argue that your guarantor loan was mis-sold to you when your lender didn’t make check your income and living expenses correctly. If you’ve found that you’ve been:
- Struggling with living expenses
- Borrowing to pay off a guarantor loan
- Topping up your loan over and over again
In these circumstances, your loan may have been unaffordable meaning you have a valid dispute cause. The complaint itself won’t affect your guarantor. They shouldn’t be told that you’ve complained. You can ask for your guarantor to be removed if:
- The loan was unaffordable for you, the borrower.
- The guarantor couldn’t afford to repay the loan without difficulty when the loan was taken out.
- You pressured them into becoming the guarantor
- The lender didn’t explain the implications of being a guarantor to them
- You had other financial links with the borrower (for example, if you share rent payments or car finance) that weren’t taken into account by the lender when affordability was assessed.
- It wasn’t made clear to you that the loan was a top-up loan and that you would be responsible for the entire loan (not just the top-up).
If you successfully removed them as a guarantor, the loan will turn into a ‘normal’ loan. If you were unable to previously explore a Trust Deed, DAS or any other debt solution due to having a guarantor loan, this ‘normal’ loan can then be included as a creditor, without any impact to your guarantor or your guarantor’s credit rating.
If you are looking to request a guarantor payment break, you should contact the company directly in the first instance.
What is Home Collected Credit?
Also know as doorstep loans, and not to be confused with those offered illegally by loan sharks, home collected credit loans are often for small sums – between £50 and £500 – over short periods, with repayments collected weekly or fortnightly at your home.
Doorstep loans tend to have a much higher interest rate than a bank loan or a credit card. All home credit lenders have to be authorised by the Financial Conduct Authority (FCA); if not, they are acting illegally.
If someone calls at your door and offers to lend you money during the Coronavirus, you should ask to see proof that they are authorised by the FCA. If they can’t provide this proof, it’s most likely that they are a loan shark or another Coronavirus scammer and you should end the conversation and report them to Trading Standards.
The new Coronavirus credit payment break measures set out expectations for lenders to:
- Offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by Coronavirus
- Allow customers negatively impacted, and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months
- Ensure overdraft customers are no worse off on price, compared to what they were charged before the recent overdraft pricing changes started
- Ensure consumers using any of these temporary payment freeze measures will not have their credit file affected.
Trust Deed Scotland urges anyone in financial difficulties to check their lending firm websites or social media posts for more information, and where possible use their online services to request assistance. Many lenders are experiencing a high demand in calls throughout their call centres, so it may require a push from you in many directions.
Doorstep loans Coronavirus policy links for the most popular home credit lenders in Scotland.
How to Request Credit Card Payment Breaks
You should only request a credit card payment break if you really require it, and you should continue to make normal payments until your lender confirms that you have been granted a payment break. you will not automatically haver interest and charges frozen during the Coronavirus outbreak.
Your credit card lender may email, or even write to you to suggest how to go about claiming a credit card payment break, but we again advise that you check your lending firm(s) websites or social media posts for more information, and where possible use their online services to request assistance.
Coronavirus Debt Advice in Scotland
At Trust Deed Scotland® we understand that debt can be overwhelming.
You may be finding it difficult to cope already and with the current Covid-19 conditions, this may be causing you to worry further about how you will afford to repay your unsecured debt, don’t worry every year we help thousands of Scottish residents enjoy a debt free future.
For qualified, expert coronavirus debt advice in Scotland, give us a call on 0141 221 0999 or complete our Trust Deed Wizard®.