Coronavirus: Payment freeze on UK car finance deals and payday loans

Tom Belger
Finance and policy reporter
Drivers may be able to apply for a payment freeze on car finance deals. (Photo by Wang Chun / Costfoto/Sipa USA)

Borrowers struggling to pay back car finance and payday loans may be able to secure short-term payment holidays from lenders under a UK watchdog’s plans.

The Financial Conduct Authority (FCA) is set to order firms to give drivers a three-month freeze on payments if COVID-19 has left them in temporary financial difficulty. It expects firms not to end agreements or repossess vehicles for such customers.

Firms offering rent-to-own, ‘buy now, pay later’ and pawnbroking agreements will also be expected to provide a three-month payment freeze for struggling customers.

The FCA announced a short consultation on the measures on Friday, seeking the views of industry before its proposals come into force. They may take the form of new guidance to firms on their obligations under the FCA’s rules over fair treatment of customers.

READ MORE: Credit card and loan payment freeze for customers hit by COVID-19

It has already announced similar payment holiday options and other support for mortgage, credit card and other loan customers.

Christopher Woolard, interim chief executive at the FCA, said: “We are very aware of the continued struggle people are facing as a result of the pandemic. These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times.”

It comes a day after the UK government extended Britain’s lockdown by three weeks in a bid to contain the virus, which has taken more than 13,000 lives in hospitals alone.

Watch the latest videos from Yahoo UK