The financial watchdog proposes help for car finance and pay day loan customers
People struggling to keep up with car loan payments will get a three-month payment holiday under new proposals announced by the Financial Conduct Authority (FCA).
It forms part of a new package of measures to help support customers amid the coronavirus pandemic.
Customers using payday loans will be granted a one-month repayment freeze as part of the measures.
The financial watchdog is also calling on rent-to-own, buy-now-pay-later and pawnbroking loan firms to grant customers a three-month payment holiday as well.
The FCA will consult with financial companies and expects to finalise its plans by 24 April.
Christopher Woolard, interim chief executive at the FCA, says: "If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan."
Supporting struggling customers
Customers who are experiencing financial difficulties due to coronavirus would not have their cars repossessed or loan agreements ended under the FCA’s proposals.
Experts advise that customers should speak to their provider and calculate the financial implications of a payment holiday.
Nick Hill, money expert at the Money and Pensions Service says: “When these measures come into place, it’s really important that people check what help their lenders can offer, and consider what the longer term implications are for the amount they owe before making any rushed decisions.
“Anyone who is worried about running into debt problems should get free debt advice, and can do this by using the debt advice locator tool on the Money Advice Service website.”
Some industry bodies argue that government support will be needed to bring in the FCA’s proposals.
Adrian Dally, head of motor finance at the Finance & Leasing Association, says: “To enable this level of support to be maintained for customers, the industry will need some help from government, and those discussions need to begin in earnest, with decisions reached rapidly.”