THE Financial Conduct Authority (FCA) has announced a package of measures that could ease the strain for motorists who are struggling to keep up with finance payments during the COVID-19 pandemic.
The range of measures cover not just motorcycle and car finance, but also short term credit (payday loans), buy now pay later purchase agreements, rent to own and pawnbroking.
For motor vehicle finance, the FCA is asking all firms to provide a 3-month payment freeze to customers who are having temporary meeting finance or lease payments due to the COVID-19 crisis. The new guidelines mean that firms should not take measures end agreements or repossess the vehicles of struggling motorists.
They also propose that firms should help to find an ‘appropriate solution’ for circumstances whereby the customer wishes to keep the vehicle at the end of the PCP agreement but cannot cover the cost of the balloon payment.
They also state that firms should not change customer contracts in a way that is unfair. For example, firms shouldn’t try to use temporary depreciation of car prices, as can be caused by a situation like the COVID-19 pandemic, to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term.
COVID-19 PCP and HP advice
If you are struggling to meet your finance payments due to the COVID-19 pandemic, the first thing you should do is approach your lending company and advise them of the situation. One measure being put forward by the FCA is a payment deferral, (like a three-month payment break) where the customer either makes a monthly or weekly nil payment or a token £1.
While a three-month payment break might sound nice, customers should be aware that the overall term and interest of the loan will be affected, possibly making the move a less helpful option in the long run. In these circumstances, lenders are being asked to look at other methods of easing the strain on customers – possibly waiving interest, reducing payments or a rescheduled term of the loan.
For more information on the FCA’s advice, please head to: fca.org.uk
For information on how to stay safe during the COVID-19 pandemic, head to: gov.uk/coronavirus
For information on riding during COVID-19, head to: www.visordown.com/when-can-i-ride-my-motorcycle-during-covid-19-lockdown
