Debts: Cost of Living

Treasury written question – answered on 23rd September 2022.

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Photo of Claire Hanna Claire Hanna Social Democratic and Labour Party, Belfast South

To ask the Chancellor of the Exchequer, whether he has had discussions with (a) banks and (b) other financial institutions on ensuring that people struggling with the cost of living and rising bills do not face financial penalties on overdrafts and mortgages if they default during the cost of living crisis.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

Treasury Ministers meet regularly with banks and other financial institutions to discuss their general lending and retail banking practices. These financial institutions stand ready to support consumers in the current economic climate. For those struggling to keep up with their mortgage payments or pay back their overdrafts in light of the rising cost of living, it is important they make early contact with their mortgage lender or overdraft provider.

The Financial Conduct Authority (FCA) has guidance that requires firms to offer tailored forbearance options to mortgage borrowers and overdraft users that are in financial difficulty. For mortgage borrowers, this could include measures such as a payment holiday, partial payment, or an extension of mortgage term. For overdraft users, the FCA set rules for banks and building societies. These include mandating that they cannot charge more for unarranged overdrafts than arranged overdrafts, banning fixed daily and monthly charges, and measures to improve the transparency of pricing. In instances where an overdraft provider identifies that a customer has a pattern of repeat overdraft use and may see increased fees on their borrowing, the rules also require firms to develop strategies to reduce harm to customers.

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