The Financial Conduct Authority (FCA) has announced proposals to help Motor Finance and High Cost Credit customers. The announcement comes after their previous announcement of help for Homeowners and Consumer Credit customers.
The proposals outline the options firms will provide motor finance, Buy-Now-Pay-Later, Rent-to-Own and pawn broking 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 31st October 2020.
For those customers of motor finance, Buy-Now-Pay-Later, Rent-to-Own and pawn broking who have already taken up support and are still experiencing payment difficulties, firms would continue to offer support. Options would include a further payment deferral or reducing payments to an affordable amount for a further 3 months.
The proposals include;
- At the end of the first payment freeze, firms should contact their customer to find out if they can resume payments. If payments can be made then a plan should be agreed on to make up the missed payments. If Customers can return to making normal payments then it is in their best interest to do so.
- Anyone who continues to need help gets help. If a customer is still facing temporary difficulties as a result of Coronavirus then;
- Firms should provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, Buy-Now-Pay-Later or Rent-to-Own agreements for a further three months.
- For Buy-Now-Pay-Later customers, where a loan within the promotional period, this would mean offering customers an extension to that period.
- For pawnbroking agreements, where the loan is within the redemption period, this would mean firms extending that period for 3 months or agreeing not to sell or suspending the sale of an item for three months if the redemption period has already finished.
- For High-Cost-Short-Term-Credit (also known as Payday Loans) customers who have had a payment freeze and are still experiencing payment difficulties, firms should be providing a range of support – including formal forbearance – this may not mean that customers are offered another payment break but firms will be encouraged to help their customers in other ways in accordance with the FCA Handbook that firms have to comply with.
- Extending the time customers are able to get help. Customers that have not yet had a payment freeze would be able to request one until 31st October 2020.
- The ban on repossessions should continue until 31st October 2020. This would apply to Motor Finance and Rent-to-Own customers still facing payment difficulties as a result of Coronavirus 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. If you’re in particular financial hardship for example or if you suffer from a mental health condition, firms should consider how they engage with you. Firms should also help you understand the types of debt help and money guidance that are available and assist you to access the resources that can help you.
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