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Can you ask creditors to freeze interest and charges?

i The advice on this page applies to anyone with personal debts taken out in the UK.

Whether you’re in arrears or struggling to keep on top of your regular payments, asking your creditors to freeze interest and charges can help you clear debts and get back on track quicker. They may agree to freeze interest for an agreed length of time if you tell them about your financial difficulties.

There are no banking guidelines say that a creditor must stop interest and charges, it’s usually up to the creditor to decide if they’re happy to do this. However, because there are many people whose finances have been affected by coronavirus, the Financial Conduct Authority (FCA) has brought in new measures, such as payment breaks and other ways to help.

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Coronavirus: What financial help are creditors providing?

The FCA has announced a range of new rules for different types of consumer credit. These include:

  • Interest-free overdrafts up to £500
  • Payment holidays for credit cards, personal and payday loans, store cards and catalogues, car finance and hire purchase.

The Scottish Government has extended the ‘moratorium’ period that provides protection from new court action and diligence for people who have debts to six months. If you're considering a moratorium, you don’t need to get debt advice from an approved money adviser, but we do recommend you do so.

Wherever you live in the UK, payment holidays relating to coronavirus won’t affect your credit score.

signpost iconRead our guide for the latest news on the coronavirus-related financial help from creditors.

The following advice covers rules unrelated to coronavirus.

Does a creditor have to stop interest and charges?

Several important codes of practice in the credit industry say that creditors should consider stopping or reducing charges and interest on a debt. If you tell them you’re in financial difficulties.

These include the Lending Standards Board Lending Code (PDF) and the Credit Services Association Code of Practice (PDF). The majority of large UK consumer credit lenders and debt collectors are signed up to one of these codes, or something similar.

In practice, it’s unusual for a creditor to continue adding interest over a long period if you’re in financial difficulties. If you have arrears on your account, eventually it’ll default and the creditor is likely to pass the debt to a collection agency. It’s also rare for interest and charges to continue after this point.

If you’re struggling to pay and you want a creditor to consider stopping interest and charges, you’ll need to let them know about your situation. They’ll usually want more information from you about your income, living expenses and other debts. We can help you get this information together - call us (free from all landlines and mobiles) or use our online debt advice tool, for help.

Are the interest and charges added to my debt fair?

Interest and charges can only be added to your debt if they’re included in the credit agreement you signed when you first took out the debt.

But the following could be classed as unfair, and if a creditor does any of these you should consider making a complaint.

  • Increasing the rate of interest because you’ve missed payments
  • Continuing to add interest and charges if you’re in financial difficulties, making the debt increase
  • Adding charges for actions the creditor hasn’t done, for example adding ‘legal costs’ or ‘solicitors fees’ to a debt when no legal action has been taken
  • Adding charges which are more than the actual cost to the creditor for collecting a debt. For example, adding a charge of £100 for sending a letter would be unfair because that’s a lot more than the cost to the creditor

Can you help get interest and charges stopped?

Your creditors are more likely to stop or reduce interest and charges if you can prove you’re in financial difficulties. We can help you make a budget which will show what you can afford to pay to your debts.

Some debt solutions will stop interest and charges, for example an individual voluntary arrangement (IVA) in England, Wales or Northern Ireland or a trust deed or debt payment plan in Scotland. If one of these is identified as the best way to deal with your debt, we can help you to set it up.

Other debt solutions such as a debt management plan (DMP) don’t force your creditors to stop interest and charges. If we help you set up a DMP, we’ll always ask your creditors to do this. But there’s no guarantee they’ll agree.

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