The FCA has revealed that its plan to give car finance customers a three-month payment holiday will be introduced today (April 24).
The temporary measures are designed to give relief to anyone suffering difficulties paying for their car during the coronavirus crisis.
The proposals were announced last week and come into force today.
The FCA says firms should provide the freeze on car finance or lease agreements and should not ‘take steps to end the agreement or repossess the vehicle’.
It adds that the car finance firms should not alter PCP or PCH agreements in a way that is unfair, for example calculating balloon payments based on a temporary depreciation in car prices due to the pandemic.
The statement said: ‘The FCA expect firms to act fairly where terms are adjusted.’
If a customer wants to keep their car at the end of their PCP agreement but does not have the cash to cover the balloon payment due to the crisis, the FCA says firms should work to find ‘an appropriate solution’.
It adds that there may be a potential for disparity between the balloon payment and the value of the car due to the crisis, and the FCA expects this not to lead to ‘unfair outcomes’ for customers.
‘For example, refinancing the balloon payment might not be appropriate in the circumstances,’ said the statement.
Christopher Woolard, FCA interim chief executive, 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.’
Commenting on the announcement, James Fairclough, CEO of AA Cars, said: ‘The millions of drivers with car finance deals will be greatly reassured to know the FCA has their back.
‘In effect, these guidelines mean that anyone who is worried about keeping up with their repayments because their income has been impacted by the Covid crisis will be entitled to a three-month payment holiday.
‘Crucially, the FCA’s measures ensure every customer will be treated the same, whoever their lender is, and whatever type of finance plan they are on.’
Gareth Shaw, head of money at consumer champion Which?, said: ‘Many people will have been financially impacted by the coronavirus crisis, so these measures will provide some much-needed relief for those who are struggling.
‘It’s vital that consumers are given clear information about how they can access this support when it is introduced, and that anyone experiencing financial hardship is aware of the options available to help them get through the challenging months ahead.’