Car finance payment freeze could be extended for struggling drivers
A freeze on car finance payments for struggling motorists is to be extended for another three months under proposals from the UK’s financial watchdog.
The Financial Conduct Authority (FCA) said that its proposal would help customers still facing difficulties due to the effects of the coronavirus outbreak.
In March the FCA ordered car finance providers, along with pawnbrokers and other credit lenders, to offer customers a payment break of up to three months if they were struggling to meet their payments.
It also implemented a ban on repossessions and stopped lenders ending an agreement early if the customer was in difficulty due to the outbreak and required the use of the vehicle.
It has now recommended that customers reaching the end of the current payment freeze should be offered a three-month extension if they still cannot resume payments.
It has also said the scheme should be extended to customers who have not yet applied for a payment holiday, allowing them to apply for one up to October 31, 2020.
Christopher Woolard, interim chief executive at the FCA, 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.”
Under the FCA proposals, lenders would be required to contact customers at the end of their current freeze and ask whether they are able to resume payments. If they are not, the lender should offer them options including extending the freeze or restarting payments on a reduced level.
It has also said the ban on repossessions should continue until October 31 for customers whose payment difficulties are related to the coronavirus outbreak.
Adrian Dally, head of motor finance at the Finance and Leasing Association, said: “The breadth of today’s guidance from the FCA recognises the variety of different situations that customers will be in at this point. With more parts of the economy reopening, many customers will be returning to work and will be able to resume full payments. For those returning to part time work, partial payments are an option.
“Customers who still need ongoing help will of course be supported. Motor finance lenders have been providing unprecedented levels of forbearance to customers since the start of the crisis, but it is now time for the Government to support the industry so that it is able to continue to offer finance to consumers and businesses at affordable rates during the recovery.”