FCA is consulting on proposals for how firms should deal with motor finance, BNPL, RTO and pawnbroking customers coming to the end of payment freezes, or who are yet to request them. The guidance is very similar to the second set of guidance already made in respect of mortgages, credit cards, personal loans and overdrafts.
In principle:
- all customers will have until 31 October to apply for a payment freeze;
- all customers coming to the end of a motor finance, BNPL, RTO or pawnbroking payment freeze or other payment support, and who are still having difficulties, should be offered further support, and firms should offer options including further deferrals or a reduction of payments, for a further 3 months. FCA notes that adopting a single solution for all customers who request further support is unlikely to meet the expectations of Principle 6;
- all relevant firms should be contacting customers who have had payment freezes as the end of the period to ask whether they can resume payment and if so agree on how missed payments should be made up. FCA says returning to making regular payments is in the customer’s best interests if they can afford to do this;
- where customers cannot afford to return to full payments, they should be offered a further freeze or reduction in payment (which, for BNPL customers may mean an extension to a promotional period, and for pawnbroking may mean an extension to a redemption period). For HCSTC customers, firms may need to consider formal forbearance;
- for motor finance and RTO customers who need their vehicles or goods the ban on repossessions will continue until 31 October;
- where customers have, for example, PCP or PCH agreements, firms should not seek to modify or unilaterally alter any aspect of the original agreement in a way that takes advantage of the customer’s necessity, lack of experience or weaker bargaining position or otherwise leads to unfair outcomes;
- for high cost credit agreements, the guidance includes a note that firms must at all times comply with the provisions of CONC that prohibit firms from pressurising customers into paying off debts in unreasonably large amounts or within an unreasonably short period of time or makes them sell property or borrow in order to repay the debt; and
- any further temporary support offered should not have a negative impact on credit files.
The detailed guidance also includes FCA’s expectations on what steps firms should take to contact customers currently benefiting from deferral, including telling them what will happen if they do not respond.
As is currently the case, FCA will disapply certain rules in CONC 7 where firms are acting under the guidance.
The deadline for comment is 5pm on 6 July, and FCA will finalise the guidance shortly after that.