Firms will now have to provide a three-month payment freeze to struggling consumers.
The UK’s financial regulator has confirmed a package of measures designed to protect motor finance customers during the coronavirus pandemic will be introduced. The measures, which were first mooted last week, include a payment “freeze” for struggling customers, as well as a crackdown on “unfair” changes to agreement alterations.
According to the Financial Conduct Authority (FCA), the “targeted temporary measures” are designed to help consumers who may be facing difficulties as a result of the ongoing coronavirus pandemic. However, the new rules will not come into force until Monday, April 27.
Perhaps the biggest of the regulation changes is the three-month payment freeze for customers facing “temporary payment difficulties” due to the ongoing pandemic. During that freeze, the FCA says no additional interest should be charged to the customer.
As proposed last week, though, the FCA will be clamping down on “unfair” changes to personal contract purchase (PCP) or personal contract hire (PCH) agreements. As an example, the organisation says firms should not try to recalculate PCP balloon payments based on a temporary depreciation of car prices caused by the coronavirus situation.
The FCA is also stepping in to help those who want to keep their vehicle at the end of a PCP agreement, but do not have the cash to hand because of the Covid-19 pandemic. The regulator also says customers should not end up with “unfair outcomes” because of the increased potential for “disparity” between agreed balloon payments and the value of the vehicle.
As well as making changes to rules surrounding car finance, the FCA has also announced new rules for high-cost credit loans, such as payday loans, and even pawnbrokers. Christopher Woolard, the interim chief executive at the FCA, said the new rules would make sure all customers can apply for repayment freezes, regardless of the company they’re dealing with.
“We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products,” he said. “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.”