Further help proposed for motor finance, rent-to-own and payday loan customers

Further help proposed for motor finance, rent-to-own and payday loan customers

Borrowers using products such as motor finance, buy-now-pay-later (BNPL) and payday loans are set to get further help if they are still facing payment difficulties due to coronavirus.

The Financial Conduct Authority (FCA) has announced proposals to extend the temporary additional support available to these customers, subject to a short consultation.

The proposals also cover customers using rent-to-own (RTO) and pawnbroking businesses.

For customers yet to request a payment freeze, the time to apply for one would be extended until October 31.

For motor finance, BNPL, RTO and pawnbroking customers who have already taken up support, and who are still experiencing payment difficulties, firms would continue to offer support with options including a further payment deferral or reducing payments to an amount the customer can afford for a further three months.

At the end of a first payment freeze, firms should contact their customers to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.

The regulator said that if customers can afford to return to making regular repayments, it is in their best interest to do so.

For pawnbroking agreements, firms may agree to suspend the sale of an item for three months.

For motor finance and RTO customers who still face temporary payment difficulties and who still need their vehicle or goods, a ban on repossessions would continue until October 31.

For payday loan customers who have had a payment freeze and are still experiencing payment difficulties, firms should be providing a range of support, including formal forbearance, the FCA said.

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.”

Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files.

But the regulator said consumers should remember that credit files are not the only source of information which lenders can use to assess creditworthiness.

The FCA is inviting feedback to the proposals by 5pm on July 6 and expects to finalise the guidance shortly afterwards.

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