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Law360, London (October 22, 2020, 1:02 AM BST) -- The Financial Conduct Authority said Thursday that the estimated number of British consumers who have fallen into financial trouble has risen by 2 million since the onset of the COVID-19 crisis and urged those households to turn to their lenders for help.
An FCA study found that about 12 million people in Britain now have so-called low financial resilience, which means they struggle to pay bills or make loan payments. Of those, the FCA said, 2 million have become newly financially vulnerable since February. The regulator based its estimates on a July survey of 7,000 people.
The FCA said consumers will still be able to access financial help after the end of October and urged consumers to ask banks for assistance.
"We want to remind consumers, especially those who are newly in financial difficulty that lenders are able to provide you with support," Sheldon Mills, interim executive director of strategy and competition, said. "There are options available to you which will reflect the uncertainties and challenges that many customers will face in the coming months."
Mills added that households suffering from serious financial difficulty should also seek debt advice.
The survey showed that people who have had their employment status changed due to the COVID-19 crisis are now more likely to fall behind on payments. More than a third of respondents who already had low financial resilience and had a mortgage said they are likely to fall behind on mortgage payments.
Some 36% of those with loans or credit cards are worried about making their repayments. And 42% of renters are concerned about falling behind on rent, the FCA said.
Almost a third of adults have seen a decrease in income, with households seeing income fall by a quarter, on average. This figure was higher from families from Black and Minority Ethnic Backgrounds, for whom 37% of households suffered a drop in income. BAME adults are also more likely to have had their working hours reduced.
The survey also found that young people have been hit particularly hard by the pandemic. Those aged between 25 and 34 are the most likely by far to have had their employment status changed since the crisis set in, the FCA said.
"Our surveys have shown that younger and BAME consumers have been impacted more than others, with a large amount of the population already having seen significant changes to their financial stability since the start of the pandemic," Mills said.
The FCA added that new local lockdown measures are likely to cause further financial strife, and urged firms to continue offering support to customers. Banks and lenders should consider suspending or waiving fees, allowing customers to make reduced repayments and allowing customers to move onto different repayment plans.
Tailored support is also available to overdraft customers who are struggling financially as a result, the FCA said.
The watchdog also urged banks and lenders to treat customers fairly, for example by not repossessing someone's home when they are in lockdown and can't access alternative accommodation.
The FCA told banks in April to offer three-month payment breaks to customers who fell ill or lost their jobs during the COVID-19 crisis, and extended the measure until the end of October. The payment deferrals did not impact a consumer's credit file.
It then set out guidance in September for lenders to help customers who will continue to need support when payment freezes on products including credit cards, store cards, motor finance and personal loans end on Oct. 31.
--Additional reporting by Najiyya Budaly. Editing by Alyssa Miller.
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