Payment freeze options to be offered to payday loan and car finance customers
Payday loan and car finance customers will be able to request temporary payment freezes under measures to give more breathing space to those financially affected by Covid-19.
The Financial Conduct Authority (FCA) confirmed on Friday that it will go ahead with a package of proposals it had outlined previously, to support people facing payment difficulties because of the pandemic.
The temporary measures will come into force from Monday April 27.
Customers should be able to request a payment deferral at any point after the guidance comes into force for a period of three months.
The measures being put in place include a three-month payment freeze for motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking agreements.
For high-cost short-term credit – including payday loans – payments will be frozen for one month with no additional interest charged.
Christopher Woolard, interim chief executive at the FCA, 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.”
The new motor finance measures mean that firms should provide a three-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus.
If customers are experiencing temporary payment difficulties due to coronavirus and need use of the vehicle, firms should not take steps to end the agreement or repossess the vehicle, the FCA said.
The regulator also said it expects firms to act fairly where terms are adjusted.
Where the customer continues to face payment difficulties, it expects firms to provide forbearance in line with its rules.
If a customer is unable to start making payments again at the end of a payment deferral period, they should contact their lender. The firm should work with the customer to resolve these difficulties in advance of payments being missed, the FCA said.