New FCA measures for motor finance customers come into effect
A new package of measures intended to support motor finance customers facing payment difficulties due to coronavirus have come into effect today (27 April 2020).
After the FCA’s initial guidance was published on 17 April 2020, the measures were confirmed last week and include that motor finance firms should provide a three-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. 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 also says that firms should not alter Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreements in a way that is unfair and that where customers wish to keep their vehicle at the end of their PCP agreement but don’t have enough cash, due to financial difficulties from the coronavirus crisis, firms should work with the customer to find an appropriate solution that does not lead to unfair outcomes.
Christopher Woolard, interim chief executive at the FCA, said: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”
However, the BVRLA has said that the FCA must work with the Government to ensure all motor finance customers get the appropriate support during the crisis.
In its response on 21 April 2020 to the initial guidance, the BVRLA had urged for a closely coordinated approach from government and regulators that:
- Underwrites the full economic loss resulting from coronavirus forbearance
- Relaxes the constraints of meeting the Consumer Credit Act’s administrative requirements
- Ensures that bank covenants don’t prevent leasing companies from providing forbearance
- Delivers a clear message to consumers that a three-month payment deferral is not the automatic response to every forbearance request
Speaking at the time, BVRLA chief executive, Gerry Keaney said: “BVRLA members are united in wanting to support all their private and corporate customers, but they are being asked to provide unprecedented levels of forbearance that come with huge additional financial risks.
“The Government needs to help all parts of the motor finance sector – bank-owned and independent – in dealing with the economic fallout of the coronavirus outbreak. By doing this it can safeguard the funders that will deliver transport decarbonisation in the future.”