1:38 pm, April 20, 2020
Black Horse Motor Finance has revealed it has given more than 60,000 payment holidays to car finance customers as lenders are inundated with calls for help.
A report in the Financial Times yesterday (April 19) said car finance firms had reported a 1,400 per cent increase in calls in the first week of the lockdown from customers concerned about making payments on their car finance.
While the Finance and Leasing Association has said calls to lenders are 20 to 30 times higher than usual.
On Friday, the FCA announced proposals to be implemented by the end of the week to give finance customers a three-month payment holiday.
The FCA said customers should not be penalised either for temporary falls in the values of cars.
In a statement the FCA specifically said firms should not try to use ‘temporary depreciation of car prices caused by the coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term’.
And added that where a customer wishes to keep their car at the end of the PCP agreement, but does not have the money to cover the balloon payment due to crisis-related financial difficulties that firms should ‘work with the customer to find an appropriate solution’.
The SMMT says more than 80 per cent of new car sales are on PCP. There are fears many will default on their loans as the economic difficulties increase and many lose their jobs.
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.
‘We have tailored our measures to specific products.
‘For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support.
‘If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.’
The FCA measures also say customers should be charged default interest or arrears-related fees during this period of uncertainty and that refunds should be given for any fees that have applied in recent weeks.
Commenting on the FCA’s proposals, car finance specialist MotoNovo CEO Mark Standish said many of the measures have already been implemented by the sector.
He said: ‘The announcement from the FCA reaffirms the steps that we and I’m sure other motor finance lenders have taken to help customers facing an unexpected financial challenge as a result of COVID-19 impact.
‘It also underlines the importance of providing support at an individual level, recognising the three-month payment freeze that has grabbed the headlines, may not be suitable to everyone.’
