The proposals are designed to complement existing government rules.
The UK’s Financial Conduct Authority (FCA) has proposed a range of measures to support motor finance consumers facing payment difficulties due to coronavirus. It follows draft temporary guidance issued last week, which included ways of helping drivers facing short-term financial problems as a result of the outbreak and the lockdown.
In the guidance published last week, the FCA said it wanted financiers to take measures to help those having “temporary difficulties” meeting finance or leasing payments due to the coronavirus outbreak. For these customers, the organisation says it “expects” firms to provide a three-month payment freeze, and it thinks firms “should not take steps to end the agreement or repossess the vehicle”.
Now, though, the FCA has also proposed that firms should not unfairly change finance customers’ contracts. For example, the organisation says firms should not 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. Instead, the FCA says it “will expect firms to act fairly where terms are adjusted”.
Similarly, the FCA suggests customers who wish to keep their vehicle at the end of their PCP agreement, but do not have the money to cover the balloon payment due to coronavirus-related financial difficulties, should also be assisted by firms. Rather than simply taking the vehicle back, the FCA says firms “should work with the customer to find an appropriate solution”.
Meanwhile, the organisation has also released new proposals for high-cost short-term credit agreements, including payday loans, and other credit products, including those provided by pawnbrokers. It is now hoping to finalise the proposals by Friday, April 24, and start enforcing them “shortly afterwards”.
“We are very aware of the continued struggle people are facing as a result of the pandemic,” said Christopher Woolard, the FCA’s interim chief executive. “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.”