Customers of payday loans and auto financing will be able to request a temporary freeze of payments on a proposal from the regulator in order to give more respite to people financially affected by Covid-19.
The Financial Conduct Authority (FCA) has announced a package of proposed measures to support people facing payment difficulties due to the pandemic.
He wants to hear responses to his suggestions before 5 p.m. on Monday, April 20, and plans to finalize the proposals by Friday, April 24, which will take effect shortly thereafter.
As part of the proposed measures, auto finance companies will have to impose a three-month payment freeze on customers who have temporary difficulties meeting finance or lease payments due to the coronavirus.
If customers experience temporary financial hardship due to the coronavirus, companies should not take action to end the deal or repossess the vehicle.
The FCA is also proposing that payday loan companies offer a one-month interest-free payment freeze to customers facing payment difficulties due to the coronavirus pandemic.
The shorter period reflects both the much shorter term of most loans and, since interest rates tend to be higher than for other high-cost credit products, prevents businesses from d ‘accumulate additional interest during the freeze period, the regulator said.
After the freeze ends, the business should make it possible for the consumer to pay the deferred payment in an affordable way, for example in a single payment after the end of the term or in several smaller installments.
The FCA is also proposing that companies that enter into lease-to-buy, buy-it-now, or pawnbroker agreements be required to grant a three-month payment freeze to customers facing payment difficulties due to of the coronavirus.
While social distancing means that pawn shops and option-to-buy rental companies are unable to redeem, collect, or repossess goods, they shouldn’t pass on any additional fees or charges to the consumer.
The measures described do not prevent companies from providing more favorable forms of assistance to any customer, including a longer payment freeze where appropriate, the regulator said.
Christopher Woolard, Acting CEO of FCA, said: “We are very aware of the continued struggle people face as a result of the pandemic.
“These measures build on the interventions we announced last week and will provide much needed relief to consumers in these difficult times.
“We have adapted our measures to specific products.
“For most of these proposals, businesses and consumers need to consider the amount of interest that may accrue and balance that with the need for immediate temporary support.
“If a payment freeze is not in the customer’s best interest, companies should come up with an alternative solution, potentially including waiving interest and fees or rescheduling the term of the loan.
Gareth Shaw, Head of Money at Which ?, said: “The coronavirus epidemic has put a significant number of people under financial pressure, so these measures are a positive step that will provide respite for those in need of assistance. urgent.
“It is essential that consumers are given clear information on how they can access this support when it is introduced, and that anyone in financial difficulty is aware of the options available to help them get through the incredibly difficult next few months. . “
Sarah Coles, Personal Finance Analyst at Hargreaves Lansdown, said: “The wait for the news on these loans has been agonizing for people trying to juggle costly debt while facing low and falling income.
“Payday loans, pawn shop, and lease purchase agreements are often used by people whose money is stretched the most at the best of times, so they’ve been at their wit’s end for a month. . “