Motorists struggling to afford car finance due to the Covid-19 pandemic will be granted a payment holiday under measures proposed by the City watchdog.
The Financial Conduct Authority (FCA) is also proposing firms should not take steps to end a finance agreement or repossess a vehicle from those who are experiencing “temporary financial difficulties”.
The package of proposals is being fast-tracked, with finance firms’ responses due next Monday, “in recognition of the significant impact coronavirus is having on consumer finances right now”. The proposal will be finalised by 24 April and come into force soon after.
Firms will also be asked not to change customer contracts for the same reason, for example by recalculating PCP saloon payments at the end of the term because the car’s depreciation has worsened due to the situation. They 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 saloon payment due to the virus.
The measures are part of wider plans targeted at payday loan companies, pawnbrokers and operators of buy-now-pay-later finance schemes.
Christopher Woolard, interim Chief Executive at the FCA, said: “We are very aware of the continued struggle people are facing as a result of the pandemic. These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times”.
Woolard also calls 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”.