Car finance customers that struggle to make payments due to coronavirus can have their payments frozen/reduced for a further three months from July 17th 2020 in the United Kingdom, the Financial Conduct Authority (FCA) said. Furthermore, those that ‘need’ their vehicles now have more time before they can be repossessed. The purpose of such measures is to give drivers the opportunity to get back on their feet. Let us consider the details.
The Financial Conduct Authority first revealed measures to help motorists that struggle to make car payments in April 2020. It explained at the time that finance firms must ‘provide a three month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus’. Those months have now passed. The FCA therefore said:
- ‘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’.
However, the Financial Conduct Authority recognises that some motorists are still struggling with money in July 2020. It therefore added that finance providers must freeze or reduce payments ‘for a further three months’. In addition, ‘customers that have not yet had a payment freeze – or requested an extension of an existing payment freeze – can request this up to October 31st 2020’.
Repossessions
The Financial Conduct Authority is also keen to stop cars being repossessed. In April 2020, it said that ‘If customers are experiencing temporary payment difficulties due to coronavirus and need use of the vehicle, firms should not take steps to end the agreement or repossess the vehicle’. It then added – in July 2020 – that a ‘ban on repossessions’ will continue until October 31st 2020.
Credit ratings
Steps have also been taken to ensure struggling motorists cannot have their credit rating ruined by coronavirus. A poor credit rating makes it significantly harder to borrow money. ‘Any payment freezes or partial payment freezes offered under this guidance should not have a negative impact on credit files’, the FCA stated.
Christopher Woolard, Interim Chief Executive, summarised the situation for drivers. ’Our measures ensure that people who are still facing temporary payment difficulties because of this pandemic continue to have access to the help they need’, he stated.