Some 12 million people in Britain are likely to struggle with bills or loan repayments amid the continued economic disruption triggered by the coronavirus pandemic, the Financial Conduct Authority (FCA) said.
A survey by the watchdog found that 12 million people in the UK had low financial resilience, and that two million of those people had become financially vulnerable since February, after lockdowns to limit the spread of the virus slashed incomes and led to thousands of job cuts.
The watchdog’s survey, in which 7,000 people took part, found that almost a third of adults have experienced a drop in income during the pandemic, with those from Black and minority ethnic (BAME) backgrounds most likely to be affected.
The FCA is urging borrowers affected by the pandemic to ask for support from lenders, and to seek free advice from government-backed organisations and charities.
The watchdog also stressed that it had told lenders to offer more support to struggling customers after 31 October, when three-month loan repayment holidays will no longer be available and the furlough scheme comes to an end.
“‘We want to remind consumers, especially those who are newly in financial difficulty, that lenders are able to provide you with support,” said Sheldon Mills, the FCA’s interim director of strategy and competition.
“There are options available to you which will reflect the uncertainties and challenges that many customers will face in the coming months,” he added. “It is also important that households in serious financial difficulty seek debt advice for support.”
Over a third of respondents who already had low financial resilience and a mortgage, said they were likely to fall behind on mortgage payments, while 42 per cent of renters said they were worried about falling behind on rent payments.
Some 36 per cent of people said they were worried about falling behind on credit card or loan repayments. The research, which was conducted in July, also found that people aged between 25 and 34 were by far the most likely to have had a change in employment due to Covid-19.
The FCA is urging banks and other lenders to treat struggling customers fairly, adding that firms should work with customers to provide support before they miss payments.
Options to negotiate new repayment plans, suspend, reduce, waive or cancel any further interest or charges will be open to consumers, the watchdog said, but told lenders to be transparent about how such measures could result in increased costs over the long term, or impact customers’ credit scores.
“‘We understand that many people will continue to live in financial uncertainty as the impact of coronavirus continues,” Mills said.
“Our surveys have shown that younger and BAME consumers have been impacted more than others, with a large amount of the population already having seen significant changes to their financial stability since the start of the pandemic.”