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MPs Call for Full Loan Payment Holidays for Business Customers

Posted 3 months ago

MPs Call for Full Loan Payment Holidays for Business Customers
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The All Parliamentary Group for Fair Business Banking has called for a full 6-month payment holiday on commercial loans for business customers who have been affected by the Covid-19 crisis. 

Since March, customers with regulated residential mortgages who have been impacted by the pandemic have been able to obtain 3-month, full payment holidays, with no adverse effect on their credit rating. In early June, the government announced that payment holidays could be extended until the end of October if required. 

In a statement, the APPG said: “Currently lenders are offering holidays on the capital element, but this is usually a relatively small part of the monthly payment with interest being the much greater element. 

“The current offer is only made available on request. Lenders should step up support and proactively offer full payment holidays, i.e. interest as well as capital, to impacted business customers. 

 “The FCA guidance states that lenders to business customers should also act in a manner consistent with their guidance for regulated products, so there is no reason that this cannot be implemented.”

The APPG goes on to argue that there is no reason why current FCA guidance cannot also apply to limited companies. Directors of small companies who are paid through dividends have already fallen through the cracks between current Government schemes, and MPs argue they are also eligible, or should be eligible, for full payment holidays. 

The full statement issued by the APPG can be found here. 

CEO of Nextfin, Sacha Bright, said: “The issue here is that business loans to limited companies is an unregulated marketplace, and there is no legal requirement for banks to act on the FCA’s guidance, unless it is a regulated product.

 “However, banks are granted a banking license from the PRA and have, in my opinion, a duty of care and responsibility to our economy. One of the principles of being a FCA-approved organisation is that you treat customers fairly and act in the interest of protecting the marketplace. 

 “It would be prudent for banking institutions to apply the guidance of the FCA to their business loans. This would not come at a massive cost to banks, as they are borrowing at the lowest interest rate ever and being supported via the Term Funding Scheme. These benefits should be passed on to businesses in the interests of acting fairly.” 

Authors: Sacha Bright & Oliver Murphy

Disclaimer

To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. Nextfin is not liable for any damages arising from the use of or inability to use this site or any material contained in it, or from any action taken as a result of using the site. 

Tagged: sme loans coronavirus alternative finance news entrepreneur business



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