The Financial Conduct Authority also said that payday loan companies should give customers one month’s payment leave as part of the emergency measures to help households affected by the coronavirus epidemic.
In addition, consumers with other credit products – such as buy-back now, hire purchase, and pawnbroking agreements – will also be allowed to suspend payments for three months if they experience difficulties. temporary financial.
The measures, which would generally require extensive consultation, are expected to take effect on April 24.
“We are very aware of the continuing struggle that people are facing in the wake of the pandemic,” said Christopher Woolard, Acting Director General of the CFA. “If a payment freeze is not in the customer’s best interest, companies should offer an alternative solution, possibly including waiving interest and fees or extending the term of the loan. These measures will provide much-needed relief to consumers in these difficult times. “
The FCA has said that auto finance companies should not take steps to terminate agreements, repossess vehicles, or modify contracts “in an unfair manner.”
Examples include using the temporary drop in car prices caused by the virus lockup to recalculate “balloon payments” at the end of a contract.
There is growing concern that some consumers in the UK £ 75 billion car loan market will not be able to cover their monthly vehicle payments. The UK car loan market includes 6.5 million vehicles financed by rental contracts.
The most common method of buying a car is a personal contract plan, known as a PCP, where a buyer pays a down payment and then leases the vehicle for two to three years at a monthly cost, usually around £ 250. .
The payday loan measures will prevent lenders from accumulating additional interest on the loans during the month-long freeze.
“After the freeze ends, the company should allow consumers to afford deferred payment at an affordable price,” said FCA. “Whether, for example, by a single payment or by a number of smaller payments. “
Earlier this month, FCA confirmed plans to freeze loans and credit card payments for up to three months as part of emergency measures for consumers affected by the epidemic. coronavirus.