The Financial Conduct Authority (FCA) has proposed a package of measures to support motor finance consumers facing payment difficulties due to COVID-19.
The FCA expects motor finance providers to offer a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. If customers are experiencing temporary financial difficulties due to coronavirus, firms should not take steps to end the agreement or repossess the vehicle.
The FCA has also proposed that:
- Firms should not change customer contracts in a way that is unfair. For example, 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. We will expect firms to act fairly where terms are adjusted.
- Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.
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 guidance includes hire purchase agreements (such as PCP agreements), conditional sale agreements or other credit agreements used to purchase a vehicle where the creditor is also the supplier (eg credit sale), as well as PCH agreements.
This guidance applies where customers are already experiencing or reasonably expect to experience temporary payment difficulties as a result of coronavirus. Where a customer was in pre-existing financial difficulty, the FCA’s existing forbearance rules and guidance in CONC would continue to apply. These would include for example the firm considering suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments for a reasonable period of time.
The proposals are intended to complement the measures already announced by the government to support consumers during the coronavirus pandemic.
The FCA is open to receiving comments on its proposals. Stakeholders are asked to respond by 5pm on Monday 20 April. The final guidance is due to be published by Friday 24 April 2020, coming into force shortly after.
