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Coronavirus (COVID-19)


Personal finance and coronavirus

In this section you'll find information and updates related to coronavirus that are relevant to personal finance issues.

The UK's response to coronavirus is changing regularly and often very quickly. While we'll continue to make every effort to keep this page up to date, there may be short periods where what you read here is not the latest information available. Where possible we've tried to provide links to official sources, so you can check the current situation.

Personal loans, credit cards and overdrafts

The Financial Conduct Authority (FCA) regulates financial services firms and consumer credit firms who in turn have to comply with the rules of the FCA.

The FCA has introduced new measures to help consumers of financial products, such as personal loans, credit cards and overdrafts, with any short-term cash flow problems they might experience as a result of the pandemic.

In short, if you have a personal loan or credit card, store card or catalogue credit you can ask the firm providing you with that facility for a 3-month freeze of repayments. This will not affect your credit rating, although it's possible that it could be factored in by lenders when making future acceptance decisions (they may use Open Banking data or payment records, both of which would detect a payment freeze). It might also mean that you will pay higher costs in the long run.

If you have a current account with an arranged overdraft, you can ask your bank for a 3-month interest-free period on up to £500 of overdraft borrowing.

Other forms of credit

The new measures will also cover you if the pandemic has led to you struggling to stay up to date with payments for other forms of credit, such as motor finance, payday loans, buy-now-pay-later credit schemes, pawnbroking and rent-to-own schemes.

It's important to read up on these new measures, as they cover more than just pay freezes. Make sure you understand your rights, so that your lender does not try to make unfair changes to your agreement when you contact them to take advantage of any of the measures.

These steps are over and above those already taken by the UK Government to assist mortgage holders, renters, furloughed employees and the self-employed.

Non-investment insurance and premium finance

The FCA has published guidance for insurance and premium finance firms on how to treat customers who are experiencing financial difficulty due to the pandemic. This builds on existing FCA principles that require firms to treat you fairly and with your best interests in mind.

The guidance tells firms that they should aim to reduce the impact of temporary financial distress you're experiencing. They should also make sure that the existing insurance you have still provides you with value for money and meets your needs (given that your needs may have changed due to the pandemic).

The FCA requires firms to not just wait for you to contact them – they should proactively help if you fall behind with payments and fail to contact them (although it is better that you do get in touch if possible).

Firms should not simply cancel insurance products if you fall behind with premiums. They'll be expected to take all reasonable steps to deliver a fair outcome. These steps may include re-assessing your risk profile, which may mean reducing your cover at a reduced cost. For example, if you previously drove to work daily covering thousands of miles annually, but are now not travelling at all, your car insurer could temporarily offer you reduced cover.

Other steps that firms could take include:

  • Offering other suitable but more affordable products
  • Waiving cancellation or amendment fees
  • Offering payment deferrals.

See the FCA for more information.

Government guidance and advice

The UK government has published information for people who are struggling to pay essential bills because of coronavirus.

Court action

If you're in the process of being taken to court over a debt, see this page under 'Court action' for information on how the courts are functioning during the pandemic.

Bankruptcy help (Scotland)

Under both the Coronavirus (Scotland) Act and the Coronavirus (Scotland) (No. 2) Act, you have more flexibility to apply for bankruptcy and more protection from creditors.

The changes will apply until 31 March 2021, and could be further extended to as far as the end of September 2021.

We've listed the main changes below, but see the Accountant in Bankruptcy website for more information on both the first act and the second act.

Moratorium extension

A moratorium is the period during which the people you owe money to can't take any formal action against you to recover it. The purpose is to give you time to consider your options and get appropriate advice.

The moratorium starts on the date on which you give the Accountant in Bankruptcy (AiB) notice that you intend to apply for bankruptcy (also known as 'sequestration'). It now ends after 6 months, rather than the usual 6 weeks. You can also now give notice to the AiB even if you have already given a similar notice in the past 12 months.

You must, however, still keep in mind that if a moratorium is approved, your details will be published on the public Register of Insolvencies and this would probably affect your credit score.

Creditor petitions

Creditors can now only apply to court to make you bankrupt (also known as 'sequestration') if you owe them £10,000 or more. The previous limit was £3,000.

Minimal Asset Process (MAP) bankruptcies

MAP bankruptcies are designed to be a simpler process if you're on a low income and have few assets. Previously, you can't make use of MAP if your debt exceeds £17,000, but that threshold has now been raised to £25,000. Any student debt you have is ignored for the purposes of calculating this total. Also, the MAP application fees have reduced from £90 to £50, and have been removed entirely if you receive certain benefit payments.

Social distancing

Meetings of creditors can now take place virtually. All forms (except Form 9) prescribed by the Bankruptcy (Scotland) Regulations 2016 can be signed using an electronic signature.

What is the law guide

The Desktop Lawyer law guide aims to present the law to you in a comprehensive yet jargon-free and easy-to-read format. Our law guide is constantly kept up to date with changes in business and family law by our team of in house solicitors, and includes information across all the legal jurisdictions in the UK.

Our law guide is free to use. Where we provide documents related to this area of law, or where they may help you with any legal issue in this area, they will be listed to the right of this message.