Car finance customers facing financial difficulties as a result of the on-going coronavirus pandemic should be offered ‘support and flexibility’ by lenders.
The Financial Conduct Authority has laid out the next steps it expects lenders to take to support struggling customers.
The existing package of measures – allowing customers to defer car finance payments should they need to – comes to an end on October 31.
These new measures mean car finance customers who cannot pay their monthly payments should be offered ‘tailored support’ by banks and finance companies after that date.
‘Firms should recognise the uncertainties and challenges that many customers will face in the coming months as the crisis develops, and provide tailored support which reflects their individual circumstances,’ said the FCA.
The city regulator wants firms to work with customers approaching the end of payment deferrals to provide further support that may be short or long-term options to help ‘minimise stress and anxiety’.
Car finance customers should not be pressured to pay their debt ‘in an unreasonably short period of time’ either, says the FCA.
Repayment arrangements that are affordable and take into account struggling customers’ wider finances including their other debts and essential living expenses should be put in place.
The FCA added: ‘Firms should prevent customers’ balances from escalating once they have put in place a repayment arrangement by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.’
The moves come as Covid-19 regulations get tighter around the country and many people face further financial hardship.
With the furlough scheme coming to an end next month job losses are expected to increase and the likelihood of car finance customers needing help will increase.
The FCA wants car finance firms to contact customers who have received support and ask what assistance they require going forward.
The FCA statement added: ‘The FCA will monitor how firms apply the guidance to ensure borrowers are treated fairly, with regard to their individual circumstances.
‘Customers should be given time to consider their options and to seek debt advice (if necessary) before deciding on the support they take.
‘Where consumers require further support from firms, either at the end of payment deferrals under the guidance, or where they need support for the first time, this will be reflected on credit files in accordance with normal reporting processes.’
The support outlined by the FCA is designed to cover the period after the existing measures end on October 31 and comes into force this Friday.
Christopher Woolard, interim Chief Executive at the FCA, added: ‘For those who can restart payments, it is in their best interests to do so.
‘However, for those who are still facing payment difficulty, or are newly in difficulty, as a result of coronavirus, we expect firms to offer a tailored package of support taking into account the ongoing situation and local or national responses to the crisis.
‘There should be no one size fits all approach taken by firms to help consumers get back on track.’