United Kingdom (and EU regulation)

Further support for consumers impacted by COVID-19: motor finance, HCSTC, rent-to-own, buy-now pay-later and pawnbroking

By Matthew Gregory (UK) and Simon Lovegrove (UK) on July 16, 2020 Posted in Coronavirus, United Kingdom

On 15 July 2020, the FCA updated the temporary guidance that it had produced in respect of the COVID-19 pandemic for firms providing motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products.

The temporary guidance was originally published on 24 April 2020. On 3 July 2020, the FCA announced that it was undertaking a short consultation to update the temporary guidance to broadly reflect the principles already finalised for mortgages, credit cards, personal loans and overdrafts. In light of respondent feedback to the consultation the FCA has made some small technical changes to the temporary guidance and in a feedback statement has clarified certain issues that were raised including:

That it is in the customers’ interests to pay what they can wherever possible.
The approach to be taken when customers do not engage or respond.
The application of aspects of the guidance to pawnbroking.

The measures in the temporary updated guidance include:

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.