FCA Guidance For Motor Finance Customers During COVID-19 Crisis
In line with its consumer protection objective, the Financial Conduct Authority (FCA) has published finalised rules and guidance which will provide temporary financial relief and support to motor finance customers who are facing payment difficulties due to the Coronavirus pandemic.
In summary, these are:
Three-month payment deferrals (on request) if a customer has Covid-19 related payment issues – firms can offer longer periods.
This needs to be in the customer’s interests.
Interest can continue to accrue during the deferral period but firms must consider whether this is appropriate.
If a deferral is not appropriate, firms should consider other ways they can help customers e.g. forbearance.
Customers can ask for payment deferral at any point during the three-month period.
Customer credit files with credit reference agencies should not be in a worse position if the customer has a payment deferral.
For motor finance – including providers of PCP, PCH and conditional sale agreements:
The refinancing rules in CONC 6.7.18R and 6.7.19R are disapplied – these rules require that a firm must not encourage a customer to refinance a regulated credit agreement if the result would be that the customer’s commitments would not be unsustainable, and a firm must not refinance a customer’s existing credit with the firm (other than by exercising forbearance) unless it does so at the customer’s request or with the customer’s consent; and the firm reasonably believes that it is not against the customer’s best interests to do so.
Firms should not take advantage of the customer’s situation when granting payment deferrals e.g. by revising the Guaranteed Minimum Future Values (GMFV) or Residual Values (RV).
Repossessions should be paused.
Firms must consider end of term issues e.g. find an appropriate solution for balloon payments.
The rules and guidance only apply to regulated agreements.
Jackie Crookes FISC’s Compliance Manager commented “The Covid-19 situation has brought about all kinds of different and difficult scenarios for customers which the FCA has been quick to respond to and with minimal consultation. The need to assist customers during these uncertain times, to take account of individual circumstances and to do the right thing by customers has never been greater. Firms must be ready to provide appropriate support to customers, whilst balancing this with the impacts of the Covid-19 situation on their own situation.”