FCA COVID-19 support for motorists could be extended

THE Financial Conduct Authority (FCA) has announced that it is to extend the raft of measures brought in to protect motorists affected by COVID-19.

The FCA has been proactive in 2020 with regards to safeguarding consumers who have been negatively impacted by the COVID-19 pandemic. These included support to motorists struggling to pay their motor finance agreements due to financial struggles brought on by the pandemic. In this case, the FCA advised that agreements could be frozen and that doing so would no impact the customer’s credit file.

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They also introduced a scheme to enable motorists struggling to pay their motor insurance to keep their vehicles on the road. In this instance the premium of the policy could be reduced, and payment deferrals of one to three months could be sought.

The new proposals would extend the existing measures designed to help keep vehicles insured until October 31st, and would see insurers be “expected to grant a payment deferral of between one and three months” in circumstances where “amendments to the insurance cover do not help alleviate the customer’s temporary payment difficulties.” 

The FCA is inviting comments on this proposal, and the deadline is 5pm on July 28th. Comments can be sent to the FCA here.

The full list of financial support measures can be found below. These apply to motor finance, buy-now-pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products, insurance and premium customers.

FCA COVID-19 support measures

• If customers can afford to return to regular repayment, or make partial payments, it is in their best interest to do so.
• Firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.
• For customers still facing temporary payment difficulties as a result of coronavirus:
  • Firms will provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, BNPL or RTO agreements for a further 3 months.
  • For BNPL customers, where a loan is within the promotional period, this will mean offering customers an additional extension to that period.
  • For pawnbroking agreements, where a loan is within the redemption period (irrespective of when the redemption period is due to end) this will mean firms offering a further extension to the redemption period. If the redemption period has already ended, this will mean agreeing not to sell the item during the payment deferral period.
• Customers that have not yet had a payment freeze or requested an extension of an existing payment freeze can request this up until 31 October 2020.
• HCSTC customers can only apply for a payment freeze under this guidance once up to 31 October 2020 in respect of each HCSTC agreement. For those customers who have had a payment freeze and are still experiencing payment difficulties, firms will provide a range of support – including formal forbearance – in accordance with the FCA Handbook.
• The ban on repossessions will continue until 31 October 2020 – this applies to motor finance and RTO customers still facing temporary payment difficulties as a result of coronavirus and who need their vehicles or goods.
• 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. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

For more information on all the measures available to motorists who have been left struggling due to the COVID-19 pandemic, head to fca.org.uk/coronavirus