Raw Deal: Car credit payment breaks for struggling finance customers

Lenders will be required to give payment breaks of up to three months to car finance customers who are struggling.

The Financial Conduct Authority (FCA) this week launched measures to help consumer credit customers – including car finance borrowers and people with payday loans.

Firms lending on deals such as PCP or HP must provide a three-month payment freeze to anyone having temporary difficulties meeting finance or leasing payments due to coronavirus. They must also not try to repossess a vehicle or end an agreement if the customer is in difficulty due to the outbreak and requires the use of the vehicle.

Christopher Woolard, interim chief executive at the FCA, said: “These measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”

The FCA warned that lenders should not alter agreements in a way that is unfair, such as recalculating balloon payments based on a temporary depreciation of car prices caused by the coronavirus situation.

It has also said that where a customer wants to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to Covid-related payment difficulties, companies should liaise with the customer to find a solution.

However, it reminded customers facing financial difficulties they must contact their lender as soon as possible and be aware any payment freeze now may lead to higher monthly repayments or longer loan terms after the freeze.

James Fairclough, chief executive of AA Cars, said: “The recommendation consumers be allowed to keep their car will be particularly valuable for key workers who rely on their vehicle to get to work.”