Jump in people missing card and loan payments ahead of support cutbacks – Which?

The number of people missing card and loan repayments has jumped in recent weeks, according to Which?

An estimated 370,000 more people defaulted on a credit card or loan in October than in September, increasing from 410,000 to 780,000, the consumer group’s UK survey findings indicate.

The findings are based on a monthly survey carried out by Populus, which includes around 2,000 people each time.

Which? said the latest findings indicate the sharpest increase in missed payments of this type since the start of the coronavirus pandemic.

Overall, around 5.8% of people in the survey reported their household had defaulted on at least one housing, credit card, loan or bill payment in October.

This was a significant increase from September’s figure of 3.8%, and was driven by an increase in defaults on credit cards and loan repayments.

Concerns have been growing that vital financial support cushioning households is being dismantled at a time when lockdown restrictions have been tightening in many parts of the UK to combat coronavirus.

The furlough scheme will be replaced with the less generous job support scheme on November 1.

Meanwhile, households struggling with their loan and credit agreements with banks will be able to ask them for tailored support after October, which is replacing blanket payment holidays.

Support arrangements made with lenders after October may also show up on people’s credit files.

Which? said it has been warning since August about the need to prepare robust plans to help people through the winter months, after its research indicated that furloughed workers are three times more likely to have defaulted on at least one payment in the previous month.

The consumer champion has called for an extension of existing support measures until the start of next year.

It said borrowers who have asked for payment holidays have reported struggling to get through to lenders.

Which? also fears that the additional requirement on lenders to assess people’s personal circumstances could create a significant backlog as the furlough scheme is wound down.

Gareth Shaw, head of money at Which?, said: “This significant increase in missed payments is a warning sign that large numbers of people could be on the brink of really struggling financially, and it reinforces our concerns about the impact of the Government, regulators and industry rolling back vital support.

“There is a real risk that the additional hurdles customers face could mean help is delayed, or impossible to access at all – which could leave many facing serious debt problems.

“Firms need to be proactive and flexible with people who need urgent help, and if there is evidence that customers can’t get the support they need quickly enough, the regulator must be prepared to introduce stronger measures.”