As many as 12 million people may struggle to make loan or other payments, with adults from Black, Asian and minority ethnic groups more likely to have seen their income drop than others, a survey by the FCA has found.
The results show that 2m of those people have become financially vulnerable since February, suggesting that it is as a result of the pandemic.
The findings show that 31 per cent of adults have seen a drop in household income and on average this reduction has been by a quarter.
Black, Asian, minority ethnic and young people are more likely to be affected with 37 per cent of adults in these groups taking an income hit.
BAME adults are more likely than other groups to have seen their working hours reduce, while those aged between 25-34 are much more likely to have had a change in employment due to the pandemic.
This will affect the take up of debt advice, with 19 per cent of those aged 25-34 saying that they were more likely to seek debt advice in the next six months compared to 2 per cent of those aged 55-64.
The regulator found that 36 per cent of people with a mortgage who already had low financial resilience, say they are likely to fall behind with repayments.
The same percentage of people with loans or credit cards are worried about repayments on these and 42 per cent of tenants fear they will fall behind with rent.
Whilst survey results show that BAME adults are more likely to have reduced working hours, those aged between 25-34 are the most likely, by far, to have had a change in employment due to the pandemic. This will affect the take up of debt advice, with 19 per cent of those aged 25-34 saying that they were more likely to seek debt advice in the next 6 months compared to 2 per cent of those aged 55-64.
FCA interim executive director of strategy and competition Sheldon Mills says: “We want to remind consumers, especially those who are newly in financial difficulty, that lenders are able to provide you with support.
“There are options available to you which will reflect the uncertainties and challenges that many customers will face in the coming months.
“It is also important that households in serious financial difficulty seek debt advice for support.
“We understand that many people will continue to live in financial uncertainty as the impact of coronavirus continues.
“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.”
Which? Head of money Gareth Shaw says the FCA does not go far enough with its follow on measures setting out how firms should treat borrowers in difficulty once more comprehensive support ends this month.
He says: “While the FCA’s actions will help some who will struggle financially when support measures like furlough come to an end, it does not go far enough to protect those most in need, particularly as swathes of the country face further restrictions and uncertainty.
“The regulator has wound down vital protections like payment deferrals too soon, and banks could now be overwhelmed by a huge number of customers that will be applying for urgent financial assistance in the next few months.
“The FCA must reconsider its decision to remove protections across all financial products.
“It should also reverse its plans to resume normal credit reporting, as it is not fair to penalise customers who fall into financial difficulty because of circumstances out of their control.”
