New payment freeze rules come into force today – several credit agreements impacted

The FCA has in recent weeks extended holiday payment rules to various forms of debt and financial instruments. Last week, the regulator announced that it planned to extend these rules further to other financial commitments.

Payday loans can be problematic for borrowers as the rates for repayments are usually very high.

The relief provided for them from the FCA will therefore likely be welcomed but it should be noted that the relief provided is not as robust as previous examples.

While most payment holidays can last for up to three months, the new payment freezes available for payday loans can only last up to one month.

However, no additional interest should be charged to the customer as a result of payday loan payment freezes according to the FCA.

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The other credit products highlighted also have varying guidelines for what should happen.

The FCA detail that firms who enter into RTO, BNPL, or pawnbroking agreements should take the following steps when engaging with a payment freeze

• pawnbrokers to extend the redemption period for the three-month freeze period or, if the redemption period has already ended, agree not to serve notice to sell an item that has been pawned for that period. If the firm has already informed the consumer they intend to sell the item, they should suspend the sale during the payment freeze