Those using motor financing during the pandemic can now receive help in the form of payment freezes if they are struggling to pay.
During a time when finances may be tight, many are turning to motor financing schemes like payday loans, rent-to-own and buy-now-pay-later plans.
The Financial Conduct Authority (FCA) has announced new measures for motor financing and other high credit payments, including several ways consumers can find relief or even payment freezes, the Daily Mail reported.
Consumers should know how their rights have been affected by the pandemic. Anyone who is experiencing financial difficulties due to the coronavirus has been given helpful and necessary benefits to alleviate fiscal stress.
For those struggling to make ends meet during the coronavirus crisis, these measures should provide much-welcomed financial relief. If borrowers have not requested a payment freeze, they can ask for one until 31 October 2020. Borrowers who already have applied for a payment freeze can get it extended as well.
“Our measures will ensure that people who are still facing temporary payment difficulties because of this pandemic, continue to have access to the help they need,” FCA interim chief executive Christopher Woolard said. “However, if you can afford to start making repayments, you should,”
For those with coronavirus-related financial struggles, the FCA’s guidance outlines the following measures, implemented 17 July 2020:
- When a borrower’s payment freeze is near termination, firms are required to contact the customer to determine whether they can proceed with regular payments. If a customer is able to begin regular payments again, a plan will be made for the repayment of missed payments.
- Motor financing, buy-now-pay-later or rent-to-own borrowers will be allowed an extended three-month promotional period if they are still struggling to make payments. Firms can provide payment freezes or payment reductions in order to supply relief.
- Pawnbroking firms will provide an extended redemption period, meaning they will not sell an item during the payment freeze period.
- Those who are struggling and in need of their vehicle have a grace period for car repossessions. Motor financing customers who are having difficulties making payments are protected from repossessions until 31 October 2020. This applies to motor financing and rent to own borrowers.
- High-cost credit product customers can ask for a payment freeze until 31 October 2020. If customers are still enduring financial distress, firms must look for a way to provide support.
- Payment freezes or partial payments under the FCA’s guidance must not negatively affect a customer’s creditworthiness. However, lenders still retain information about borrowers that can affect credit scores.
If a borrower is able to afford whole payments, it should be done. Firms are working in the best interest of customers right now, gauging what they can contribute.
The FCA has been diligently working to protect the financial wellbeing of borrowers throughout the pandemic.
In June, the FCA reported that customers who are experiencing financial difficulties due to the pandemic can ask for a payment freeze or request an interest-free overdraft of up to £500. The watchdog also issued payment freezes on credit cards, store cards and personal loans until the end of October.
The FCA urges firms to be aware of the vulnerabilities of borrowers right now and should be considerate when determining their needs and how much they can afford. It is important for firms to help borrowers discern different types of debt.
Firms are expected to let borrowers know they have access to resources that can help them in their time of need.
Have you applied for a payment freeze due to coronavirus-related struggles? Did you meet any resistance? Let us know in the comments.
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