The Financial Conduct Authority (FCA) says car finance customers struggling to pay due to coronavirus will get an extra three months of forbearance. That means those facing “temporary payment difficulties” as a result of the Covid-19 pandemic will be able to suspend payment until later this year, but the FCA has urged those who can make repayments to do so.
Back in April, the FCA confirmed lenders would have to offer customers facing temporary problems with payment a three-month “freeze” on repayments. However, customers who took lenders up on this offer would still have to pay the money back at some point.
The idea was to help customers facing cash flow issues during the coronavirus pandemic, either as a result of furlough or other issues caused by the Covid-19 pandemic. Rules were also put in place to prevent “unfair” changes to finance agreements – in particular those caused by a drop in vehicles’ residual values (the amount they would be worth at the end of the agreement).
Now, the FCA says the three-month forbearance must be able to continue for a further three months, but it said it was in the “best interest” of any customer to make full or partial payments if they could possibly afford to do so. Firms will begin by contacting customers coming to the end of their current three-month freeze to find out whether they can now make payments.
For those who still cannot afford to make repayments, though, the FCA says firms “will provide them with support by freezing or reducing payments to a level they can afford”. Financiers are also unable to repossess customers’ vehicles if they are “still facing temporary payment difficulties as a result of coronavirus” and “need their vehicles”.
The Finance and Leasing Association (FLA), which has campaigned for government support to help financiers offer customers forbearance, said it welcomed the FCA’s advice that customers who can now afford repayments should pay either in full or in part.
“We welcome the fact that the FCA has given greater prominence and emphasis to the message that those customers who can resume full or partial payments should do so,” said Adrian Dally, head of motor finance at the FLA. “This is particularly important to prevent customers accruing unsustainable levels of debt, but also to allow further support to be given to those most in need.”