Following the news that the FCA has confirmed the support users of certain consumer credit products will receive if they are still experiencing temporary payment difficulties due to coronavirus, John Perez, Partner at DWF, said: “The FCA’s decision to provide further support for consumer credit customers is undoubtedly good news for those who are continuing to feel the impact of Covid-19. However, the move raises concerns about how the industry itself will continue to cope on a financial basis.
“In the motor finance market, we have seen new business in April reduce by 94% compared to the same period last year. And in addition to this significant drop in new business, lenders will continue to have to take the hit on defaulting accounts, ensuring that they provide support and forbearance over and above usual standards. It’s a cost that will bite right into lenders’ bottom lines.
“The general economic outlook will mean that the cost to lenders in ensuring they meet the new temporary measures set by the FCA will place a significant strain on liquidity and profitability.
“The Finance Leasing Association have called for the Government and Bank of England to support lenders at this crucial time.
“Lenders should look to automated solutions that customers can use to implement forbearance solutions. There has been an unprecedented demand on lenders and their call centre teams over the last few months, leading to disgruntled customers who are often waiting hours before calls are answered. Those lenders who began planning for this contingency at the start of the lockdown are likely to be in a much stronger position to service their customer base.”