7:48 am, April 17, 2020
Customers struggling to pay for car finance agreements should be offered a payment holiday of three months under proposals announced today by the FCA.
The Financial Conduct Authority, which regulates the finance industry, has said it expects firms to provide a three-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus.
The FCA said finance firms should not change contracts in a way that is unfair.
The proposals have been announced today so finance companies can comment before they are finalised and put into force by Friday, April 24.
April 24
Date new proposals should come into force
In a statement it 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’.
It said 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’.
It does not suggest what that solution should look like.
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 included in the proposals announced today a string of similar measures for high-cost short-term credit, including payday loans and pawnbroking agreements.
More: Can I cancel my car finance if I am struggling to pay?
