Banks and regulators have moved to ease the bills of people struggling to make household payments as the pandemic stalls economic activity.
In the US this has seen the amount of people seeking unemployment benefits jump by 22 million in the last four weeks since people have been urged to stay at home because of the coronavirus. In the UK just under one million applications have been made for Universal Credit, a huge jump from the usual 100,000 who apply each two-week period.
The interim chief executive of the UK city watchdog, the Financial Conduct Authority (FCA), Christopher Woolard said the body is trying to help customers “weather the storm during this challenging time”.
What’s happening in the UK
The FCA has asked motor finance companies for a three-month freeze. It is also urging companies in buy-now-pay-later, rent-to-own, and pawnbroking loans to delay repayments.
Under the proposals, people who have borrowed payday loans will get a one-month extension. The regulator has already announced a three-week moratorium on credit card and loan repayments. It also proposed a three-month zero interest overdraft up to £500 for people affected by the pandemic. The body said using these facilities will not hurt customer credit ratings.
FCA’s Woolard, said: “If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.”
Critics have said payday loans freezes should also have been three months long
But FCA said it deliberately kept the moratorium lower for payday loans as it “reflects both the much shorter length of most loans and, given interest rates tend to be higher than for other high-cost credit products, prevents firms from accruing additional interest during the freeze period.”
What’s happening in the US?
The US Federal government has so far sent around 80 million stimulus checks to those who qualify to help meet living expenses, as part of a $250bn bailout package. The first round went to people the IRS already had direct deposit information on file for, from their 2018 or 2019 tax returns. The checks are worth up to $1,200 for eligible individuals, $2,400 for couples and $500 for each dependent child under 17.
To be eligible for the full amount, a person’s most recently filed tax return must show that they made $75,000 or under. For couples, who can receive a maximum of $2,400, the cutoff is $150,000.
If a person makes more than $75,000, the amount given goes down incrementally by $5 for every $100 increase in salary. So a person who makes $85,000 would get $700 while a person who makes $95,000 would get $200.
If a person makes above $99,000, or a couple makes above $198,000, no check will be given.
The federal government has also expanded unemployment benefits as an unprecedented number of peoples file jobless claims.
Some US banks have offered reprieves to customers in the form of postponement of payment, waiver of late fees, and cancelation of overdraft fees. But there is a growing public clamour for all bank to waive overdraft fees across the board.
The federal government has also eased the norms so that individuals impacted by the pandemic can withdraw up to $100,000 from their 401k (s) and IRAs.
However, since the money forms part of retirement savings, many financial experts advise against dipping into them to tide over the current financial crunch.
These are challenging times. If you are looking at raising some funds to tide over the current crisis, see our recommended loan providers here. We also have compiled a list of loans for people with bad credit
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