The City watchdog has confirmed proposals, first outlined last week, to support those in car finance agreements facing cashflow issues due to the Covid-19 pandemic.
The Financial Conduct Authority (FCA) has consulted with lenders and the wider industry to agree a package of measures, including a three-month payment freeze for those with temporary difficulties meeting finance or leasing payments.
Firms should not take steps to end a finance agreement or repossess a vehicle from those who are experiencing “temporary financial difficulties”.
Customer contracts should not be altered for the same reason – for example, by recalculating PCP balloon payments at the end of the term because the car’s depreciation has worsened due to pandemic-related reasons. Firms should also “work with the customer to find an appropriate solution” if the customer intends to keep the car at the end of a PCP agreement but cannot afford the balloon payment due to circumstances arising from the virus.
The measures are part of wider plans targeted at payday loan companies, pawnbrokers and operators of buy-now-pay-later finance schemes. They will come into force on 27 April.
Christopher Woolard, interim chief executive at the FCA, said: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”
The measures also call for an “alternative solution” if a payment freeze isn’t in the interest of the customer, including “the waiving of interest and charges or rescheduling the term of the loan”.