The Financial Conduct Authority has confirmed that motorists who are financing or leasing cars will be given a three-month payment freeze, should they be adversely affected by the coronavirus pandemic. In the week after the FCA floated its proposals, the legislator also stated that companies should not “recalculate PCP balloon payments based on a temporary depreciation of car prices caused by the situation” or attempt to “refinance balloon payments” for customers that can’t presently cover the costs.
In short, it means those worried about losing their PCP or contract hired cars due to financial difficulty in these unprecedented times can breathe a sigh of relief - or at least temporarily rest in the knowledge that they’ve three months to address the problem. The changes come as part of wider finance and loan legislation changes, designed to prevent consumers being unfairly penalised for an event nobody had prepared for. It’s likely to effect a significant number of owners; almost nine in ten cars bought in the UK are through a PCP.
Not everyone will notice a change following the announcement, though, as Christopher Woolard, interim FCA chief executive said: “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.”
Previous story: 17.04.2020
At a time of unprecedented difficulty for the economy, the country and the population, the Financial Conduct Authority (FCA) has announced a range of measures intended to ease the burden on consumers overwhelmed by credit arrangements.
With the aim "to complement the measures already announced by the government", the FCA's strategies cover buy-now-pay-later arrangements, rent-to-own and, perhaps most relevantly for PHers, car finance.
The proposal suggests that a three-month payment freeze be introduced for finance or lease customers now in financial straits because of the coronavirus. It goes so far as to say that, during this time, firms "should not take steps to end the agreement or repossess the vehicle."
In addition, the FCA has put forward the idea that any customers wishing to keep their vehicle at the end of the PCP, but who are struggling for the balloon payment, should seek a compromise with finance companies. The exact wording is that the firms "should work with the customer to find an appropriate solution." The FCA has also said that the finance firms "should not change customer contracts in a way that is unfair." Specifically that means the aforementioned balloon payments should not change in light of covid-related car depreciation.
The FCA has said that it's "open to receiving comments" on its plans, with stakeholders asked to respond by 5pm on Monday. Interim Chief Executive Christopher Woolard said: "We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support. If a payment freeze isn't in the customer's interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan." Expect a further update early next week.
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