On April 24th, the Financial Conduct Authority confirmed measures initially announced on the 17th to support those struggling to make car payments during the Covid crisis.
For the next three months, those who have experienced a reduction or loss of household income due to Coronavirus can apply for temporary payments freezes. Motor finance companies should not take any steps to end contracts or repossess vehicles at this time.
Firms should not be altering agreements in any “unfair” way, such as recalculating balloon payments based on car values being lowered due to the crisis. If a customer wishes to keep their vehicle at the end of their agreement, but doesn’t immediately have the cash to cover the balloon payment, firm should work with customers to find a fair, sustainable solution.
If the platform providing financing can’t accept £0 payments, then it’s possible to make £1 monthly payments instead of the full amount. Customers will not be considered to be in arrears, and no fees or charges will be added, although interest may still be charged.
If a three month payment freeze is not appropriate, then the lender should immediately offer some other form of temporary relief or a rescheduled term of payment.
Because these payment freezes and deferrals are being granted in exceptional circumstances beyond customer control, firms should not be reporting worsening arrears status. If a customer has missed payment because of operational issues within the lending company (long waits for help, etc.) then the lender must rectify with the CRA.
For more details on these measures, visit the FCA website. For information about what specific companies are offering, you can read the Tully breakdown here.
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