The news that a lot of motorists have been praying for is finally here. The Financial Conduct Authority has insisted that Britains vehicle owners have access to a 3 month payment holiday due to the Coronavirus pandemic and subsequent lockdown.
The FCA has also stated that there must be no forced vehicle repossessions in this 3 month period and these changes can come into effect as soon as April the 24th.
This is huge news for us, it really is. In the UK, between 80-90% of vehicles are bought using financial agreements such as hire purchase or personal-contract-purchase. These monthly payments are typically manageable under usual circumstances, but since the Coronavirus outbreak, there has been a huge number of motorists struggling to make their monthly payments.
The Finance and Leasing Association reported a staggering rise in calls to lenders from customers since the UK has been put under lockdown. In some cases, businesses are experiencing 20 to 30 times the typical daily call rate from consumers.
Adrian Dally, head of motor finance at the FLA, said: “There has been a very significant percentage increase in call volumes going into member companies,”
“This is causing very significant operational pressures.”
Encouragingly, some lenders have already been ahead of the curve. Black Horse, one of the UK’s largest motor finance companies, owned by Lloyds Banking Group, have already provided over 60,000 motor finance payment holidays to their customers.
With the FCA’s intervention, there has also been a few stipulations to ensure leasing companies cannot capitalise unfairly. The FCA has said that no forced repossessions will be allowed and there can be no effort from companies to terminate loan agreements early.
Better still, the FCA have specifically said they do not want motor finance providers to adjust customer contracts ‘in a way that is unfair.’
This can be perceived rather subjectively, however, the FCA has stated: “For example, 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. We will expect firms to act fairly where terms are adjusted.”
Put simply, the cost of finance and leasing agreements are weighted against the perceived future value of the vehicle. The FCA isn’t allowing lenders to increase the price of monthly payments based on a change of that perceived future value caused by Coronavirus.
The Financial Conduct Authority are currently welcoming scrutiny and comments on these changes until Monday the 20th of April and they hope that the changes can be made as soon as Friday the 24th of April.