Below is a summary of the key updates relating to Coronavirus over the past week. You can also read our guide on how to get help if you've been impacted financially by coronavirus, or chat to an adviser through our webchat from 8:30am-6pm Mon-Thurs, 8:30am-3:30pm Fri. 

Further FCA temporary measures 

From this week, a new package of temporary measures from the FCA will apply across a range of consumer credit products that were not covered by the initial measures. This new package includes motor finance, high-cost short-term credit (including payday loans), rent-to-own, buy-now-pay-later, and pawnbroking. 

It is important to note that:

• These measures do not prevent lenders from charging interest during a payment freeze
• The only exception to the above is high-cost short-term credit, including payday loans where additional interest should not be charged
• Customers may need to pay more at the end of a payment freeze
• Under some of these proposals, lenders may not need to give customers a payment break if it is not in the customer’s best interests
•  Customers should not reduce or cancel payments until they have contacted their lender(s)
• Lenders may offer further support that is not included in this package of measures

Motor finance 

Motor finance customers experiencing difficulties making payments due to coronavirus can apply for a 3 month payment freeze.

Firms should not alter aspects of customers’ Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreement in a way that is unfair. For example, firms should not recalculate the value of a customer’s car based on a temporary decrease in used car values (due to coronavirus) in order to charge them more each month through their ongoing repayments.

For customers that want to keep their vehicle at the end of their PCP agreement, but do not have the money to cover the outstanding balance due to coronavirus-related temporary financial difficulties, firms should work with them to find a solution.

As well as this, if a customer is experiencing temporary payment difficulties due to coronavirus and needs the vehicle, their motor finance provider should not take steps to end the agreement or try to repossess the vehicle.

High-cost short-term credit, including payday loans

Customers experiencing temporary difficulties meeting payments due to coronavirus can request a freeze of payments on their high-cost short-term credit loan for 1 month. The 1-month timeframe reflects the shorter length period of these types of agreement compared to other forms of credit.

High-cost short-term loans usually charge high interest rates. Under the proposals, the lender will not charge the additional interest that would otherwise build up over the 1-month repayment freeze. However, customers will still have to resume payments in full following the 1-month freeze and will still owe the outstanding balance.

For customers that are still facing payment difficulties once the freeze is over the lender should offer forbearance in line with FCA rules. This may involve allowing customers to make up repayments in an affordable way – whether for example, by one single payment at the end of the term, or by a number of smaller payments.

Customers concerned that their finances won’t be back on track after a month should speak to their lender about other options – including an affordable repayment plan.

Rent-to-own

Customers that are having temporary difficulties meeting payments due to coronavirus can apply for a freeze on repayments to their rent-to-own agreement for 3 months.

In addition, if a customer needs the goods they are renting during this period, they will not be repossessed.

Where social distancing means rent-to-own firms are unable to collect or repossess goods, they should not charge customers extra for this unavoidable extension of the agreement.

Buy-now-pay-later

Customers facing temporary payment difficulties because of coronavirus can ask for a freeze on repayments to their buy-now-pay-later agreements for 3 months.

For customers that have a buy-now-pay-later agreement and are within a promotional period, their lender should extend the promotional period by the length of the freeze period.

During a promotional period, customers do not have to make repayments each month but will be charged interest on any balance they have not paid back by the end of that period.

Pawnbroking 

Customers facing temporary difficulties meeting payments due to coronavirus can request a freeze on payments on their pawnbroking agreement for 3 months.

This will involve the redemption date being extended for this period. If the date has already passed, an item a customer has pawned should not be sold for that period.

If notice of intention to sell has already been given to a customer, the firm should suspend the sale for the period of the payment freeze.

For customers already experiencing difficulty 

These changes are intended to provide help for short-term cash flow problems. For customers that have longer-term problems or are in other financial difficulty, other options may be more appropriate.

The FCA states that firms must help customers if they’re having financial difficulties.

For customers struggling to make loan payments, firms should consider:

• suspending, reducing, waiving or cancelling any further interest or charges
• deferring payment of arrears
• accepting smaller payments for a reasonable period of time

Customers should contact their lender to discuss which options are best for them.

New government small business scheme 

The UK government has this week announced a new scheme that will allow small businesses to access loans of up to £50,000. Businesses will be able to apply online from Monday 4 May. 

The terms of the loan mean that no capital or interest repayments will be due for one year, during which time the government will pay the interest. Unlike the existing loan scheme, banks will not retain any of the risk for these loans.

In applying for the loan, businesses will only have to show that they were sustainable before the pandemic, not that they will be after (as was the case with initial loan schemes) as businesses have found it difficult to predict how they will fare in the future.

For more information on the scheme, see the gov.uk website.