Millions of customers will be able to apply for payment holidays on high-interest loans and car finance from next week as new measures come into force - effectively their freezing bills for up to three months.
Regulator the Financial Conduct Authority (FCA) said a three-month payment freeze on motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking debts, will come into force on Monday.
Those with outstanding payday loans will also benefit from a one-month break with no additional interest charged for 30 days.
Christopher Woolard, interim Chief Executive at the FCA, said: "We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products.
"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."
The FCA has confirmed the following measures.
Car finance
From Monday, car finance firms will be able to provide a three-month payment freeze to customers who are having temporary difficulties meeting their finance or leasing payments due to coronavirus.
Repossessions will also be frozen for those who cannot give up their vehicle, for example, due to essential work.
Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related payment difficulties, firms should work with the customer to find an appropriate solution, the FCA said.
Payday loans
Payday lenders will have to provide a one-month payment freeze to customers who are facing temporary payment difficulties due to the coronavirus pandemic.
No additional interest should be charged as a result of the payment freeze. This shorter period reflects the much shorter length of most of these loans and the higher interest rates compared to other high cost credit products.
The FCA expect firms to use the deferral period to engage with their customers to understand whether they are likely to be in a position to resume payments.
Where the customer continues to face payment difficulties, customers should be offered alternative support such as a single payment after the end of the term or a number of smaller instalments instead.
Rent-to-own payments
Customers with loans on products from buy-now-pay-later firms such as BrightHouse, rent-to-own companies or pawnbrokers will be able to ask for a three-month payment freeze from Monday.
Pawnbrokers are being told to extend the redemption period for the three-month freeze period or, if the redemption period has already ended, to not serve notice to sell an item that has been pawned for that period.
Any sales that have already been agreed should be suspended until after June.
Elsewhere, buy-now-pay-later customers who are still in their promotional period, should have this extended for 90 days.
Rent-to-own firms will also have to provide a three-month payment freeze. Repossessions have also been banned for three months.
The FCA adds that if social distancing means that pawnbrokers and RTO firms are unable to take payment, collect or repossess goods, they should not pass on any additional charges or fees to the consumer.
It said if a payment freeze isn't in the customer’s best interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.
