FCA to tell lenders to extend payment freeze on car finance and high-cost credit

Erwin Oropesa
New and nearly new cars are displayed for sale on a forecourt of a car dealership. (Matt Cardy/Getty Images)
New and nearly new cars are displayed for sale on a forecourt of a car dealership. (Matt Cardy/Getty Images)

The UK’s Financial Conduct Authority (FCA) on Friday indicated that it will tell rent-to-own firms, car finance providers, and pawnbrokers to keep offering payment freezes to borrowers in financial difficulty in the wake of the coronavirus crisis.

Under extended proposals, customers who have yet to request a payment freeze would also have until 31 October to do so, the FCA said.

Under a payment holiday announced in April, the FCA ordered firms to give drivers a three-month freeze on payments if the pandemic had left them in temporary financial difficulty. It told firms not to end agreements or repossess vehicles for such customers.

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Firms offering rent-to-own, “buy now, pay later” and pawnbroking agreements were also expected to provide a three-month payment freeze for struggling customers.

Customers who have already sought support under these initiatives would be entitled to further support, such as payment deferrals or reductions, for a further three months, the watchdog said.

The ban on repossessions should also continue until 31 October, it advised.

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The FCA said that it had opened a consultation on the proposals and welcomed comments from industry on them by the close of business on 6 July, noting that it expected to finalise the guidance to firms shortly afterwards.

“It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need,” said Christopher Woolard, the interim chief executive of the FCA.

“For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there.”

The FCA has already announced similar extension to the payment holiday options and other support measures for mortgage, credit card, and other loan customers.

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