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Business_news Banks are assessing their policies as loan deferral periods are nearing their deadlines

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The periods during which loan customers have been allowed to defer payments due to the ongoing effects of the coronavirus crisis are coming to a close in both the US and UK, requiring banks and regulatory bodies to decide what happens next:



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  • In the US, banks are taking a close look at loans that are on pause to determine next steps. Forbearance programs that began in March are getting close to their expiration dates, and lenders are preparing to investigate the degree to which customers receiving relief actually need to defer payments, Bloomberg reports. While many lenders offered to put off payments with little to no proof of hardship at the onset of the crisis, they are now examining accountholders to see who really needs the assistance of forbearance programs. For example, some banks are trying to figure out which customers are still employed by checking databases operated by major credit reporting firms.
  • In the UK, Chancellor Rishi Sunak is mulling the extension of a mortgage payment holiday scheme. Sunak is working with the Financial Conduct Authority (FCA) regulatory body and the banking sector on a plan that would extend the mortgage holiday scheme for several months for consumers who are still feeling the economic fallout of the coronavirus pandemic, the Financial Times reports. While no decision has been reached yet, banks want the FCA to extend the scheme for borrowers who are genuinely struggling — people close to the banks told the FT that “there would not necessarily be a ‘blanket’ extension and that the criteria for applicants could be tightened.” 

Banks will face a delicate balancing act as they weigh compassion against the risk of damage to their bottom lines. If banks push too hard to get customers to resume payments, or if they apply interest too soon, they could appear callous and oblivious to clients’ needs, causing long-term damage to customer loyalty and trust.

But the longer they allow mortgage payments to remain on hold, the longer they will suffer a blow to revenue. For this reason, financial institutions will need to gather as holistic of a picture as possible of customers’ financial situations and the degrees to which they’ve been affected by the pandemic, so lenders can determine who they should nudge back toward repayment.

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