Payment holiday: Consumers ‘struggling’ to get through to lenders as 2nd lockdown starts

Payment holiday requests can now be made into early 2021, as the FCA extended their deadlines in light of the continuing coronavirus pandemic. This will be relieving to thousands of consumers who are still seeing their finances take a hit but new research highlights a worrying trend.

Bruce Curry, FICOs vice president for collections and recovery consulting and sales in Europe, the Middle East and Africa, commented on the importance of these findings ahead of the coming challenges: “As a new lockdown is due to come into force in England, the FCA has confirmed an extension to the payment holiday arrangement; government has also extended the furlough scheme for some sector.

“This is a turning point for lenders — they must be able to respond faster across multiple channels, or risk losing a big piece of their customer base.

“Indeed borrowers across every segment said that they are likely to move accounts in the next six months, or when renewing the secured credit, because of their experience during COVID-19.”

Interestingly, the research found traditional forms of communication remained popular among consumers, even in the face of a digital world.

According to recent FCA reports, 12 million people in the UK had low financial resilience in the summer and over a third of those people are predicted to fall behind on their mortgage, loans or credit card payments.

Bruce concluded by providing a warning on how Christmas could make these circumstances even worse: “People will be struggling to pay their bills for some time, and looking to their bank or other financial provider for real, thoughtful help.

“The second national lockdown will increase the number of credit-stressed consumers, who won’t show up in collections right away as they will get support in the near-term.

“The post-Christmas peak may look flatter, as people use the payment holidays to cover holiday spending. If that does happen, the normal collections spike will come back with a vengeance later in the year, as Christmas borrowing on revolving credit becomes harder to service.

“These compounding stresses make omnichannel communication and self-serve strategies more important than ever. Lenders need to deliver both improved customer engagement and satisfaction, while reducing pressure on stretched contact centres.”