Further help for motor finance and payday loan customers confirmed

Borrowers using products such as payday loans, motor finance and buy-now-pay-later (BNPL) schemes will receive further help if they are still facing temporary payment difficulties due to coronavirus, the City regulator has confirmed.

The measures, introduced by the Financial Conduct Authority (FCA), were previously subject to a consultation.

The guidance comes into force on Friday July 17 and also covers customers using rent-to-own (RTO) and pawnbroking businesses.

For customers yet to request a payment freeze, the time to apply for one would be extended until October 31.

Firms will provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, BNPL or RTO agreements for a further three months.

Customers who have not yet had a payment freeze, or asked for an extension of an existing payment freeze, can request this up until October 31.

A ban on repossessions will also continue until October 31 – this applies to motor finance and RTO customers still facing temporary payment difficulties as a result of coronavirus and who need their vehicles or goods.

Payday loan customers can only apply for a payment freeze under the guidance once, up to October 31, in respect of each agreement.

For those customers who have had a payment freeze and are still experiencing payment difficulties, firms will provide a range of support, the FCA said.

Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under the guidance should not have a negative impact on credit files, the regulator said.

But it added that consumers should remember that credit files are not the only source of information which lenders can use to assess creditworthiness. For example, lenders hold their own information about existing customers.

The regulator said that if customers can afford to return to regular repayment, or make partial payments, it is in their best interests to do so.

It said that firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.

Christopher Woolard, interim chief executive at the FCA, said: “Our measures will ensure that people who are still facing temporary payment difficulties because of this pandemic, continue to have access to the help they need.

“However, if you can afford to start making repayments, you should.”