Motor Finance Payment Freeze Extended During Coronavirus

Published / Last Updated on 06/07/2020

The Financial Conduct Authority (FCA) has promised continued support for customers with high cost credit and motor finance, that still have difficulties with payments due to coronavirus.

The FCA has issued options to firms to provide their customers that are coming to the end of a payment freeze and for customers that haven’t requested one.

Customers can request a payment freeze, which has been now been extended till 31 October 2020.

Customers for motor finance, buy-now pay-later (BNPL), rent-to-own (RTO and pawnbroking customers that still experience payment difficulties and have taken support, firms will be offering further payment deferrals or reduced payments that the customer can afford.

FCA proposals:

  • Firms should contact their customers at the end of a first payment freeze and find out if they can resume payments.  Then agree a plan on repaying missed payments.  It is in the best interest for customers to return to making regular payments if they can afford to.
  • Customers still facing payment difficulties, firms should provide support by freezing or reducing payments that are affordable to their customer for a further 3 months on motor finance, BNPL and RTO agreements.
  • Loans within the redemption period for pawnbroking agreements, firms will extend that period for 3 months or agree to not sell or suspend the sale of an item if the redemption period has finished for a further 3 months.
  • HCSTC customers that still experience difficulties in payments who have had a payment freeze, firms will provide a range of support including formal forbearance in accordance with the FCA Handbook.

People that maybe impacted at a later date

  • A time extension on the scheme will be available, customers will be able to request a payment freeze which has been extended till 31 October 2020.

Repossessions ban to continue till 31 October 2020

  • Applying to customers with motor finance and RTO’s still facing payment difficulties due to the pandemic that require need vehicles or goods.

Temporary support to bridge the crisis

  • Customers having further payment freezes or part payment freezes offered under the guidance should not have a negative impact on their credit files.  Customers should be aware that credit files are not the only source of information which lenders use to assess their creditworthiness.

Finance firms should be aware of their customers needs and their vulnerability and consider how they engage with them.  Firms must have a duty to their customers to make sure they understand the types of debt and money guidance that are available and assist them to access the resources that can help them.

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