On 17 April 2020, the FCA announced a package of measures to support consumers facing payment difficulties due to the COVID-19 pandemic. The range of temporary measures cover motor finance and high cost credit agreements including:

• high-cost short-term credit (including payday loans);
• buy-now pay-later (BNPL);
• rent-to-own (RTO); and
• pawnbroking.

In terms of motor finance, the FCA expects firms to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to the pandemic. If customers are experiencing temporary financial difficulties due to the pandemic, firms should not take steps to end the agreement or repossess the vehicle.

The FCA has also proposed that:

• firms should not change customer contracts in a way that is unfair. The FCA gives the example that firms should not try to use temporary depreciation of car prices caused by the coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. The FCA will expect firms to act fairly where terms are adjusted; and
• where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.

The FCA is proposing that high-cost short-term credit (payday lending) firms will be expected to provide a 1 month interest-free payment freeze to customers facing payment difficulties due to the pandemic. After the end of the freeze, the firm should allow the consumer to pay the deferred payment in an affordable way – whether for example, by 1 single payment after the end of the term or by a number of smaller instalments.

For other credit products, the FCA is proposing that firms that enter into RTO, BNPL or pawnbroking agreements will be expected to provide a 3 month payment freeze to customers facing payment difficulties due to the pandemic. Specifically:

• pawnbrokers should extend the redemption period for the 3-month freeze period or, if the redemption period has already ended, agree not to serve notice to sell an item that has been pawned for that period. If the firm has already informed the consumer they intend to sell the item, they should suspend the sale during the payment freeze;
• if a BNPL customer is within the promotional period, firms should extend this by the length of the payment freeze;
• RTO firms should provide a 3-month payment freeze. In addition, if a customer needs the goods during the guidance period, repossession should not take place; and
• if social distancing means that pawnbrokers and RTO firms are unable to redeem, collect or repossess goods, they should not pass on any additional charges or fees to the consumer.

The FCA adds that the above measures do not prevent firms from providing more favourable forms of assistance to any customer, including a longer payment freeze if appropriate.

The deadline for comments is 5pm 20 April 2020. The short timescale is due to the significant impact the COVID-19 pandemic is having on consumers’ finances.