Confusion and concern raised over debts and payment holidays

10th February 2021

New research released by Resolver has revealed widespread confusion over payment holidays and the potential impact on people’s future finances.

The company says to help people face down the financial challenges posed by the pandemic, the Financial Conduct Authority (FCA) introduced clear rules for lenders so they could offer people ‘holidays’ from mortgage, loan, credit and other financial debts.

While this temporary relief from financial commitments has been broadly welcomed, over a third of the people Resolver surveyed did not realise that financial businesses were allowed to charge interest on the outstanding balances or when this would be payable. Furthermore, a third of people who’d actually taken a payment holiday did not understand this either.

Findings in the survey revealed that 15% of respondents had taken at least one payment holiday on a mortgage, loan or other financial agreement, while others had taken more than one and that 2 in 10 had been forced to use their overdraft facility over lockdown to make ends meet – and of those, just under half had strayed into the ‘charging zone’ of £500.

Four in ten people who had taken a payment holiday told Resolver they didn’t have all their options explained to them. Over a third of people also said that they were concerned about paying back their debts and that many lenders are reluctant to confirm if their customer’s credit scores or ‘lending status’ were being affected as a result of taking a payment holiday.

Though many of the people in the survey who managed to get help from the lender were generally satisfied, Resolver’s complaints data shows that people contacting the company for help with a problem are struggling to find contact details or get through to the lender. This mirrors the wider trend across all sectors where users saying that they can’t get hold of businesses.

Resolver’s CEO, Alex Neill, said “After a year of turmoil and uncertainty, the option to take a break from financial commitments has undoubtedly been essential for struggling households around the UK. But the idea that they’re some sort of no-strings ‘holiday’ is simply not the case.”

“Resolver’s survey reveals that many people simply did not understand the full impact of taking a payment holiday on their finances – and have not received enough information or clear options on what will happen next if they continue to struggle.”

“With the impact of Coronavirus continuing and 1.7 million people out of work, it’s clear lenders will need to do more to provide support and improve communications to those that require much needed relief in the face of financial difficulty, helping them to budget and plan for any longer-term issues.”