Struggling car finance and payday loan customers can freeze payments until November
CAR finance and high cost credit borrowers can now extend payment freezes until November.
The city watchdog has announced a raft of measures to help struggling consumers when their repayment holidays come to an end following the coronavirus crisis.
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The new rules apply to payday loans, car finance, rent to own, buy now pay later and pawnbroking customers.
All the changes come into force from July 17.
It follows the FCA telling lenders to freeze car finance and payday loans repayments for up to three months for struggling borrowers back in April.
Christopher Woolard, interim chief executive at the FCA, said: “Our measures will ensure that people who are still facing temporary payment difficulties because of this pandemic, continue to have access to the help they need."
But he warns that borrowers who can afford to return to regular repayments or who can afford partial repayments should do so.
This is important because the longer you put off paying your debt down the more you'll have to repay overall as interest payments build up.
If you took a payment holiday - your provider will contact you to find out if you can start repaying.
If you can, they will agree a plan on how the missed payments could be repaid.
Here's all the new rules for each type of borrowing.
High cost credit - including payday loans
Payday loan borrowers are allowed to request a payment and interest freeze of at least a month.
Your lender is not allowed to discourage you from making a claim and must make sure that you don't end up owing extra interest.
After the freeze, firms must allow customers to repay what's owed in an affordable way.
This could be in a lump sum, or through a series of smaller payments.
Customers are only allowed one payment freeze per loan, and you must apply before October 31.
If your payment freeze comes to an end, and you are still struggling, your creditor has to offer a range of support - including formal forbearance.
Forbearance measures include suspending, reducing, waiving or cancelling further interest or charges, deferring payment of arrears, or accepting token payments for a reasonable period of time.
Rent to own, buy now pay later, and pawnbroking
If you have a rent to own, buy now pay later, or pawnbroking agreement, your lender should have offered a three-month payment freeze.
Now, the FCA says firms should freeze or reduce payments to a level customers can afford for an additional three months, until November.
If you have signed up for buy now pay later, in a promotional period - such as the first three months interest-free - you should see this extended by a further three months.
Meanwhile, if you have entered into an agreement with a pawnbroker and are still in the redemption period, this will be extended by an additional three months.
If the redemption period has already ended, your pawnbroker has to agree not to serve notice to sell your items from another three months.
With rent to own, which is where borrowers pay a monthly fee for household goods such as TVs and fridges, the FCA says firms should continue to hold off repossessing goods.
This ban on repossessions will stay in place until October 31, 2020.
Borrowers who've not yet had a three-month payment freeze will also be able to request one up until October 31.
Car finance
Car finance borrowers have already been given a three-month payment freeze to help cope with coronavirus.
Now, the FCA says lenders should extend this freeze or reduce payments to a level customers can afford for a further three months.
A ban on vehicles being repossessed is also expected to continue until October 31.
Car finance borrowers who've not yet had a payment freeze will also be able to request one up until October 31.
Will credit scores be hit?
Any payment freezes that get approved by lenders won't have an impact on the credit file of borrowers.
This has always been the case throughout the coronavirus crisis, as credit reference agencies have an emergency payment freeze agreement in place.
But while a payment holiday won't impact your score, it may harm your chances of getting credit in future.
MoneySavingExpert, for example, found that taking a payment break could stop you from getting a mortgage in the future.
This is because many lenders rely on more than just your credit score when considering whether or not to give you a loan.
Taking out a new loan or overdraft or increasing existing limits isn't covered by these rules, which your score could be affected.
MORE ON MONEY NEWS
Just this week the FCA said struggling credit card borrowers need to be offered lower repayments and more time to pay off interest-free overdrafts.
But overdraft borrowers have been warned that repayments are set to be hiked from this month as interest rates are set to rise at most banks.
Meanwhile, Universal Credit five-week wait ‘makes debts worse’ as 4 in 5 have first payment docked.
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