Millions of drivers could see their finance payments suspended for three more months under new rules just announced by city watchdog the FCA.
But they aren’t the only ones set to benefit – with payment holidays also extended covering rent-to-own, payday loans and even buy-now-pay-later arrangements and pawnbrokers.
The proposals from the watchdog are designed to make sure support packages for borrowers don’t run out before furlough ends and businesses can open again.
Christopher Woolard, FCA interim chief executive, said: “It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need.
“For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there.”
The new plans are designed with each different product in mind – with different rules for car finance and pawnbroking, for example.
There are also bans on repossessing cars and other goods while the payment holiday is in force.
But firms will be able to charge interest during the payment freeze.
Lenders have until 5pm on Monday, 6 July, to respond – but if past form is anything to go by they should become formal measures more or less unchanged by the end of next week.
In more detail, the proposals say:
- At the end of a first payment freeze, firms should contact their customers to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid. If customers can afford to return to making regular repayments it is in their best interest to do so.
- Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment freeze, would be able to request one up until 31 October 2020.
- The ban on repossessions should continue until 31 October 2020 – 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.
- Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
But rather than a blanket payment freeze, people extending their payment holiday now have new options to part-pay.
The FCA said firms should:
- Provide 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.
- For BNPL customers, where a loan is within the promotional period, this would mean offering customers an additional extension to that period.
- For pawnbroking agreements, where the loan is within the redemption period, this would mean firms extending that period for three months or agreeing not to sell or suspending the sale of an item for three months if the redemption period has already finished.
- For HCSTC customers who have had a payment freeze and are still experiencing payment difficulties, firms should be providing a range of support – including formal forbearance – in accordance with the FCA Handbook.