FCA demands car finance firms offer immediate payment delays and not end contracts04/17/2020
Car finance payments should be suspended if motorists have experienced financial difficulties as a result of the pandemic. The FCA has demanded companies do not end an agreement or repossess a vehicle due to the ongoing crisis.
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A statement by the group said: “The FCA expects firms to 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 financial difficulties due to coronavirus, firms should not take steps to end the agreement or repossess the vehicle.”
The FCA has demanded companies do not change contracts in an unfair way and demanded firms to be fair in their approach.
The agency has said companies should work with customers to find an “appropriate” solution during the crisis rather than simply ending agreements.
They particularly reference customers who may wish to keep their vehicle at the end of their agreement but may not have the money to cover extra costs at the time being.
Companies should not try to depreciate car prices or recalculate balloon payments, according to the FCA.
Christopher Woolards, interim Chief Executive at the FCVA said: “We are very aware of the continued struggle people are facing as a result of the pandemic.
“These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times.
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“We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support.
“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.”
The FCA have said companies who do not consider a three month payment deferral appropriate should offer other ways to provide temporary relief.
Extra measures may include reduced payments, a rescheduled payment term or a partial payment of a policy.
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Payment deferrals of less than three months can also be offered in some situations to help as many mtorost as possible.
They say the guidance does not stop some firms offering longer payment extensions to customers if they wish.
Motorists should be able to request a payment deferral at any point after the guidance comes into force.
They say the policy will not be impacted by the end of the scheme meaning deferred contracts will continue once activated.
However, firms are not prevented from continuing to charge interest and have been urged to give customers adequate information to help them understand the implications of a deferral.
The new scheme comes just days after the FCA confirmed new measures would come into place to help struggling motorots.
The FCA have already pushed car insurance companies to ensure motorists are not compromised while making a claim during the crisis.
They have previously pushed for firms to remain fair and not misleading despite the ongoing situation.
Last week, AA Cars expert James Fairclough confirmed finance agreements could be terminated by motorists “without penalty” in some circumstances.
He said motorists who wished to terminate an agreement could do so as long as they had paid off at least 50 percent of their Personal Contract Plan (PCP).
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