The Financial Conduct Authority (FCA) has confirmed a three-month payment freeze for car finance payments, ruling out repossessions of vehicles during the coronavirus pandemic.
Firms will freeze payments for customers facing difficulties meeting finance or leasing payments due to coronavirus. The financial watchdog said firms should also not take steps to end the agreement or repossess the vehicle.
It comes as part of a package of measures to support consumer credit customers, which will take force on 27 April.
“We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products,” said interim FCA boss Christopher Woolard.
“Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”
Firms will also have to provide a one-month payment freeze to customers facing financial difficulty. They will not charge any additional interest during the freeze.
Lenders involved in pawnbroking agreements are also expected to give customers a three-month payment freeze.
John Perez, head of finance litigation at law firm DWF, said: “Lenders will need to suppress their systems to ensure that during the payment holiday the agreement is not treated as having gone into arrears”. Additionally, they will have to “take particular care when reporting to credit reference agencies, ensuring that customers’ credit files are not adversely affected in any way.”
Perez added: “Lenders must also prepare for the end of the three-month period, as it is very likely that many of the impacted customers will remain in need of ongoing support.”
The FCA said customers unable to start making payments at the end of the deferral period should contact their lender. It also called for frms to work with customers “to resolve these difficulties in advance of payments being missed.”