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Borrowers to get new help if they can’t meet payments due to Covid

Borrowers using payday loans, buy-now-pay-later deals, car finance and pawnbrokers get new help if they can’t meet payments due to Covid

  • Guidance comes in force on Friday and covers rent-to-own business customers
  • For customers yet to request payment freeze, they can apply up to October 31  
  • A ban on repossessions for motor finance and RTO customers will also continue
  • Regulator said it is in customers’ best interests to return to regular repayment

Borrowers using payday loans, buy-now-pay-later schemes, car finance and pawnbrokers will get new help if they can’t meet payments due to Covid-19, the City regulator has confirmed.

The measures, introduced by the Financial Conduct Authority (FCA), were previously subject to a consultation.

The guidance comes into force on Friday and also covers customers using rent-to-own (RTO) businesses.

Borrowers using payday loans, buy-now-pay-later schemes, car finance and pawnbrokers will get new help if they can’t meet payments due to Covid-19 (file photo)

For customers yet to request a payment freeze, the time to apply for one would be extended until October 31.

Firms will provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, BNPL or RTO agreements for a further three months.

Customers who have not yet had a payment freeze, or asked for an extension of an existing payment freeze, can request this up until October 31.

The regulator said that if customers can afford to return to regular repayment, or make partial payments, it is in their best interests to do so (file photo)

The regulator said that if customers can afford to return to regular repayment, or make partial payments, it is in their best interests to do so (file photo)

A full list of the new measures to come into force on Friday

  • Firms will provide support to customers by freezing or reducing payments to a level they can afford.
  • Where a loan is within the promotional period, BNPL customers will be offered an additional extension.
  • For pawnbrokers, where a loan is within the redemption period, firms will offer a further extension.
  • Customers that have not had a payment freeze or requested an extension of an existing one can request this up to October 31.
  • HCSTC customers can only apply for a payment freeze up to October 31, in respect of each agreement.
  • The ban on repossessions will continue to October 31 – applying to motor finance and RTO customers struggling to pay due to Covid-19.
  • Where a customer needs further temporary support, any payment freezes or partial payment freezes under the guidance should not have a negative impact on credit files – but it is reminded credit files aren’t the only source of information that lenders can use to assess creditworthiness.
  • Source: FCA 

A ban on repossessions will also continue until October 31 – this applies to motor finance and RTO customers still facing temporary payment difficulties as a result of coronavirus and who need their vehicles or goods.

Payday loan customers can only apply for a payment freeze under the guidance once, up to October 31, in respect of each agreement.

For those customers who have had a payment freeze and are still experiencing payment difficulties, firms will provide a range of support, the FCA said.

Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under the guidance should not have a negative impact on credit files, the regulator said.

But it added that consumers should remember that credit files are not the only source of information which lenders can use to assess creditworthiness. 

For example, lenders hold their own information about existing customers.

The regulator said that if customers can afford to return to regular repayment, or make partial payments, it is in their best interests to do so.

It added: ‘When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and should consider how they engage with them. 

‘Firms should also help customers understand the types of debt help and money guidance that are available and encourage them to access the resources that can help them.’

It said that firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments – and if so, agree a plan on how the missed payments could be repaid.

Christopher Woolard, interim chief executive at the FCA, said: ‘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.

‘However, if you can afford to start making repayments, you should.’

Read more at DailyMail.co.uk


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