Anyone struggling financially as a result of coronavirus will be able to get an interest-free one-month extension to their payday loans under new proposals from the regulator.
At the end of the freeze, firms have also been told they have to allow customers to pay the deferred payment in an affordable way - for example a single payment after the end of the term or a number of smaller instalments.
Financial Conduct Authority (FCA) chief executive Christopher Woolard said: "We are very aware of the continued struggle people are facing as a result of the pandemic.
"These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times."
Sarah Coles, Hargreaves Lansdown personal finance analyst, said: “The wait for news on these loans has been agonising for people trying to juggle expensive debts while dealing with low and falling incomes."
She also explained why you only get a month off payments with payday loans, rather than the three months offered elsewhere.
"The FCA has struggled to solve the problem of payday loans. It’s caught between a rock and a hard place. If it forced a three month payment freeze and let interest build up, the bills would be impossibly huge," she said.
"Meanwhile, if it forced a three-month interest-free payment freeze, it could put these companies out of business and people would end up at the mercy of informal and unregulated forms of debt.
"The compromise of an interest-free payment freeze for just one month will offer a little breathing space and is far better than nothing, but for many people it won’t be nearly enough to help them make ends meet."
High-cost-short-term-lenders were also reminded to consider if immediate formal forbearance is more suitable if a customer was already in financial difficulty before the impact of coronavirus.
If you are already struggling, regardless of the reason, the FCA's forbearance rules allow firms to suspend, reduce, waive or cancel any further interest or charges, defer payment of arrears and accepting token payments for a reasonable period of time.
Firms have until 5pm on Monday, 20 April 2020, to respond - with the new rules expected to come into force on Friday 24 April 2020.
