High-cost credit and car finance payment holidays extended
Last month we reported that the Financial Conduct Authority had agreed with lenders that, where borrowers were struggling because of the COVID-19 pandemic, loan and credit card payment holidays could be extended for a further three months. On Friday, it also introduced new measures that paved the way for high-cost credit and car finance payment holidays.
Car finance payment holidays extended
In the early stages of lockdown, many car manufacturers took the initiative to offer customers payment holidays. The FCA later imposed new measures that required lenders to offer 3-month breaks to any struggling customer.
Many customers now want to see car finance payment holidays extended. The FCA has now made this possible. If you are in financial difficulty due to the coronavirus, you can apply for a 3-month payment holiday. You can do this up until 31 October 2020. If you have already had a payment holiday and are still in financial difficulty, you can now apply for another one. However, while lenders are likely to be sympathetic, they are only required to grant you one payment freeze.
The payment holidays apply to both Personal Contract Purchase (PCP) and Personal Contract Hire (PCH) agreements. During your payment freeze, lenders are not allowed to alter your agreements in any unfair way. To give one example, they cannot recalculate your vehicle’s value in order to impose higher ongoing payments.
It’s also worth noting that if you are struggling financially, car finance firms shouldn’t be able to end your agreement or repossess your vehicle before 31 October. Similarly, if you want to keep your car at the end of a PCP agreement, but you are struggling to pay the outstanding balance, lenders should work with you to agree a solution.
High-cost credit payment holidays
The FCA has also imposed new payment holiday rules on a range of high-cost credit products. As with motor finance, you can apply for a first or second 3-month payment holiday up until 31 October 2020. Additional rules also apply to each of them, as outlined below.
- Rent-to-own. If you need the goods you have, the lender cannot repossess them until after 31 October. If firms cannot collect or repossess items because of social distancing measures, they cannot charge you extra for extending your agreement in this way.
- Buy-now, pay-later. If you are within a promotional period of your agreement, your lender should extend it over any payment holiday. You will still be charged interest on any balance you haven’t paid back during this period.
- Pawnbroking. Redemption dates should be extended to cover any payment freeze period. If notice of intention to sell have been issued already, it should be suspended until the payment holiday is over.
If you have taken out any of the forms of credit covered in this post, it’s vital that you keep your lender informed. In this way, you can work together to agree an affordable solution. For example, while a car finance lender may not be willing to offer you a second, full payment holiday, they may agree a partial repayment freeze that is more affordable. Alternatively, a lender may agree to suspend or waive interest or charges or accept smaller repayments for an additional period of time.
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About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.