FCA Extends Payment Breaks For High-Cost Credit Borrowers

By Joanne Faulkner
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Law360, London (July 3, 2020, 12:17 PM BST) -- The Financial Conduct Authority instructed rent-to-own companies, car-finance providers and pawnbrokers on Friday to continue offering payment freezes to borrowers in financial difficulty during the coronavirus crisis.

The markets watchdog plans to extend until Oct. 31 the deadline for consumers who are struggling with high-cost credit or car finance debt and who want to apply for a payment freeze.

Finance companies should offer further deferrals or reduce payments to an affordable level for those people who have already taken up repayment support but are still experiencing financial difficulties, the FCA said.

The regulator, which brought in the protections in April, said lending companies should contact their customers  to find out whether they are able to resume payments.

"It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need," Christopher Woolard, the FCA's interim chief executive, said. "For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there."

Payment freezes were introduced by the FCA in as it sought to provide temporary relief measures to help consumers facing default as the lockdown began to bite.

The rules mean that car finance providers have been banned from repossessing vehicles until the end of October. Pawnbrokers are not allowed to sell items given by customers as collateral for another three months, while payday lenders must also give the option of forbearance for customers for another three months.

The regulator stressed that consumers who can afford to return to making regular repayments should do so. Lenders should agree a plan on how missed payments could be repaid If their customers can afford to make repayments again, the FCA said.

The watchdog is asking for comments on the proposals by July 6 and expects to finalize the guidance shortly afterward.

Last month the regulator extended similar measures for providers of credit cards and other loans amid concerns about widespread financial difficulties.

Most banks have been offering payment breaks on credit cards and store cards, catalog credit and personal loans since they were urged to do so by the FCA in April.

Homeowners are also able to secure a payment "holiday" on their mortgages.

--Editing by Ed Harris.

For a reprint of this article, please contact reprints@law360.com.

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