FCA Helps Vehicle Finance Consumers during the COVID-19 Outbreak
As a mobile mechanic, I have been busy during lockdown providing my usual roadside service whilst adhering to social distance and hygiene guidelines. I chat to lots of car owners every day and several have expressed concern that they can’t get through to their car finance companies to discuss a payment holiday. For anyone experiencing difficulties, here is the latest news about payment freezes from the FCA.
With concern that many consumers in the UK’s £75bn car loan market would not be able to cover their monthly vehicle repayments, the FCA worked at speed to come up with a package that urged firms to halt repossessions. As of Monday 27th April, credit firms have been required to provide payment freezes and to follow certain fair practice guidelines.
Christopher Woolard, interim Chief Executive at the FCA, said: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. 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.”
The FCA has confirmed the following:
- Finance firms to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to COVID-19. Firms should not take steps to end the agreement or repossess the vehicle.
- Firms should not alter Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreements in a way that is unfair. For example, firms should not try to recalculate PCP balloon payments based on a temporary depreciation of car prices caused by the COVID-19 outbreak. The FCA 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 payment difficulties, finance firms should work with the customer to find an acceptable solution. Given the increased potential for disparity between the balloon payment and the value of the vehicle, firms should ensure that solutions do not lead to an unfair outcome for the car owner. For example, refinancing the balloon payment might not be appropriate at this time.
What does this mean for you?
If you are experiencing difficulties making repayments on motor finance due to COVID-19 the FCA urges you to talk to your credit provider. You should be able to request a payment deferral at any point after the guidance came into force (27th April) for a period of 3 months. That period may be reviewed by the FCA.
Further advice can be found on the FCA website. https://www.fca.org.uk/news/press-releases/fca-confirms-support-motor-finance-and-high-cost-credit-customers
Whilst we all appreciate that these are exceptional times, and customer service support at motor finance firms will have been overwhelmed in the early weeks of lockdown, I hope that any of my customers who needed to reschedule payments have been successful.
In the meantime, I am available for mobile car servicing and remain committed to getting you back on the road in the shortest time.