The Finance and Leasing Association (FLA) has expressed concern over the extension of the payment deferral period for consumer credit customers.
In a statement outlining the policy, the Financial Conduct Authority (FCA) said: “Following the announcement of the latest government restrictions in response to the coronavirus outbreak, we will propose updates to our temporary guidance on motor finance credit to support consumer credit customers financially affected by coronavirus.
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“To support those financially affected by coronavirus, we will propose that consumer credit customers who have not yet had a payment deferral under our July guidance can request one. This could last for up to 6 months unless it is obviously not in the customer’s interests. Under our proposals borrowers who are currently benefitting from a first payment deferral under our July guidance would be able to apply for a second deferral.”
In response to the FCA’s announcement, Stephen Haddrill, director general of the FCA, said that it is vital that support is provided in a way that best serves the interests of borrowers.
“This is best achieved best achieved under existing FCA rules that require lenders to assess their customer’s position carefully. Giving borrowers the impression that a six-month deferral is always the right answer is dangerous. It could leave people with unsustainable debts that they may struggle to repay.
“The FCA should limit its guidance on payment deferrals to three months at this stage as it did in March, so that there can be a full review of the policy by the FCA, and of individual circumstances by lenders before any extension. Without this, some people will continue deferring payments and accruing debt to their extreme detriment.
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By GlobalData“If HM Treasury and FCA press ahead with a deferrals policy until the end of March 2021 in spite of these risks, then furlough should also be extended well beyond one month to give more people a realistic chance of being able to better manage their repayments in the interim.”
The latest figures from the FLA revealed that the number of new vehicles purchased on finance by businesses saw a 28% year-on-year decline in August.
