The Financial Conduct Authority (FCA) has announced proposals to provide continued support for motor finance customers in the wake of the coronavirus crisis.
The proposals outline the options firms will provide motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking customers who are coming to the end of a payment freeze, as well as those who are yet to request one. For customers yet to request a payment freeze, the time to apply for one would be extended until 31 October 2020.
For customers that have already taken up support, and who are still experiencing payment difficulties, firms would continue to offer support with options including a further payment deferral or reducing payments to an amount the customer can afford for a further three months.
Christopher Woolard, interim chief executive at the FCA, said: “It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need. For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there.”
The new proposals include:
- At the end of a first payment freeze, firms should contact their customers to find out if they can resume payments. If they can, agree a plan on how the missed payments could be repaid. If customers can afford to return to making regular repayments it is in their best interest to do so.
- Firms should provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, BNPL or RTO agreements for a further three months.
- Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment freeze, would be able to request one up until 31 October 2020.
- The ban on repossessions should continue until 31 October 2020 – this applies to motor finance and RTO customers still facing temporary payment difficulties as a result of coronavirus and who need their vehicles or goods.
- Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and should consider how they engage with them. Firms should also help customers understand the types of debt help and money guidance that are available and assist them to access the resources that can help them.
The FCA has opened the proposals to the industry for comments until 6 July and expects to finalise the guidance shortly afterwards.
Commenting on the announcement, Adrian Dally, head of motor finance at the FLA said: “The breadth of today’s guidance from the FCA recognises the variety of different situations that customers will be in at this point. With more parts of the economy reopening, many customers will be returning to work and will be able to resume full payments. For those returning to part time work, partial payments are an option.
“Customers who still need ongoing help will of course be supported. Motor finance lenders have been providing unprecedented levels of forbearance to customers since the start of the crisis, but it is now time for the Government to support the industry so that it is able to continue to offer finance to consumers and businesses at affordable rates during the recovery.”