On 24 April 2020, the FCA published temporary guidance concerning:
- Motor finance agreements and coronavirus.
- High-cost short-term credit (HCSTC) and coronavirus: temporary guidance for firms.
- Rent-to-own, buy-now pay-later and pawnbroking agreements and coronavirus.
On 3 July 2020, the FCA announced proposals to amend the above temporary guidance so to provide continued support for users of motor finance and high cost credit products who face payment difficulties due to the COVID-19 pandemic.
The proposals outline the options firms will provide motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking customers who are coming to the end of a payment freeze, as well as those who are yet to request one. For customers yet to request a payment freeze, the time to apply for one would be extended until 31 October 2020. For motor finance, BNPL, RTO and pawnbroking customers that have already taken up support, and who are still experiencing payment difficulties, firms would continue to offer support with options including a further payment deferral or reducing payments to an amount the customer can afford for a further 3 months.
Key points in the proposals:
- At the end of a first payment freeze, firms should contact their customers to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid. If customers can afford to return to making regular repayments it is in their best interest to do so.
- Anyone who continues to need help gets help – for customers still facing temporary payment difficulties as a result of coronavirus:
- Firms should 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 three months.
- For BNPL customers, where a loan is within the promotional period, this would mean offering customers an additional extension to that period.
- For pawnbroking agreements, where the loan is within the redemption period, this would mean firms extending that period for 3 months or agreeing not to sell or suspending the sale of an item for three months if the redemption period has already finished.
- For HCSTC customers who have had a payment freeze and are still experiencing payment difficulties, firms should be providing a range of support – including formal forbearance – in accordance with the FCA Handbook.
- Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment freeze, would be able to request one up until 31 October 2020.
- The ban on repossessions should 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 the amended guidance should not have a negative impact on credit files. However, consumers should remember that credit files are not the only source of information which lenders can use to assess creditworthiness.
The FCA adds that when implementing the updated guidance, firms should be particularly aware of the needs of their vulnerable customers and should consider how they engage with them. Firms should also help customers understand the types of debt help and money guidance that are available and assist them to access the resources that can help them.
The deadline for comments on the proposals was 5:00pm 6 July 2020.