The FCA has announced another proposed package of measures to directly support consumers facing payment difficulties due to coronavirus (Covid-19). The range of targeted temporary measures cover motor finance and high cost credit agreements, which include: high-cost short-term credit (including payday loans), buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking.
The proposals are intended to complement the measures already announced by the government to support consumers during the coronavirus pandemic. The FCA is open to receiving comments on its proposals. Stakeholders are asked to respond by 5pm on Monday 20 April. The short timescale for this work is in recognition of the significant impact coronavirus is having on consumers’ finances right now.
Christopher Woolard, interim Chief Executive at the FCA, said: ‘We are very aware of the continued struggle people are facing as a result of the pandemic. These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times.
‘We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support. If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.’
The FCA expects firms to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. If customers are experiencing temporary financial difficulties due to coronavirus, firms should not take steps to end the agreement or repossess the vehicle.
The FCA has also proposed that:
- Firms should not change customer contracts in a way that is unfair. For example, firms should not try to use temporary depreciation of car prices caused by the coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. We will expect firms to act fairly where terms are adjusted.
- Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.
As for most of our other loan freeze arrangements, firms will be able to continue to charge interest during the payment freeze (except in the case of high-cost short-term credit). However, in the event that a customer requires full forbearance that interest should be waived. If a customer was already in financial difficulty, the FCA has existing forbearance rules which apply. These will include for example the firm considering suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments for a reasonable period of time.
The measures outlined do not prevent firms from providing more favourable forms of assistance to any customer, including a longer payment freeze if appropriate.
Richard Jones, Managing Director of Motor Finance and Leasing at Lloyds Banking Group, said: “We welcome guidance from the FCA on the support that should be offered to motor finance customers who have been impacted by Covid-19.
“Since the start of the pandemic, we have already helped more than 50,000 personal customers using the temporary support measures we have introduced. Customers can apply to defer their payments for up to three months on Personal Contract Purchase, Hire Purchase and Contract Hire agreements by using our new online service, which enables most customers to action their request instantly. There are no missed payment fees and a customer’s credit rating will not be adversely impacted.”
“There are also a range of options in place to help businesses and we have already granted payment holidays to more than 3000 of our fleet customers. Those with up to 20 vehicles on fleet can apply to defer their payments online, and those with fleets of more than 20 vehicles should contact their account manager directly to discuss the support that’s on offer.”