As expected, FCA has confirmed it will be going ahead with the measures it has consulted on to support customers facing difficulties in making payments on motor finance, buy-no-pay-later, rent-to-own and pawnbroking agreements because of Covid-19.
The measures will take effect from 27 April and comprise:
- for motor finance:
- a 3 month payment freeze for customers experiencing temporary difficulties
- where these customers need to use the vehicle, firms should not be looking to end the agreement or repossess the vehicle
- firms should not alter PCP or PCH agreements in a way that is unfair – for instance they should not base balloon payments on a temporary depreciation of car prices, and must act fairly where they adjust terms
- firms should work with customers who want to keep their vehicles at the end of their PCP agreement but cannot cover the payment due to Covid-19 difficulties. Again, firms must avoid unfair outcomes, and note that refinancing the balloon payment may not be appropriate
- for HCSTC, including payday loans:
- a one month payment freeze that involves no additional interest
- FCA expects firms will use the deferral period to speak to customers about whether they are likely to be able to resume payments and, if they cannot, provide forbearance in line with FCA rules
- firms should consider whether immediate formal forbearance might be more appropriate for customers in difficulties before Covid-19 or who expect their difficulties to last longer than one month;
- other credit products (RTO, BNPL and pawnbroking):
- a 3 month payment freeze and
- pawnbrokers should extend the redemption period for the freeze period or not serve notice of sale for an item for that period – and must suspend any sales of which they have given notice;
- BNPL promotional periods must to be extended by 3 months for customers within them;
- RTO firms should not repossess goods during the 3 month period if the customer needs them;
- no firm should pass onto a customer any additional charges incurred because firms are unable to take payment, collect or repossess goods and
- firms must consider whether a payment freeze is in the customer’s best interests and, if it is not (eg because of interest that would accrue), offer an alternative, such as waiving interest or rescheduling the term of the loan.
- a 3 month payment freeze and
As with the measures already in place, firms must work with customers to try to resolve any potential difficulties customers may face when payments resume, and should, if appropriate, offer more favourable assistance. Customers can request a payment deferral any time in the next 3 months.