Following the news that the FCA has confirmed additional support for motor finance and high-cost credit customers who continue to face payment difficulties as a result of coronavirus, John Perez, Partner at DWF, said: “Lenders will need to give careful consideration on how they treat accrued interest on missed payments during the deferral period. The FCA have made it clear they expect lenders to waive interest on missed payments should customers be in need of extended support during this period. There will be challenges for lenders in how to implement any waiver of interest.
“Also, any customer requiring support through an extended deferral period will mean that lenders will have to wait 6 months before reverting back to standard enfacement options, including taking steps to terminate the finance agreement. This could lead to poor outcomes, not only for lenders balance sheets, but also for customers who could be faced with a much higher crystallised shortfall down the line once steps are taken to recover and sell the vehicle at a much reduced value due to depreciation throughout the 6 month period, and the threat of reduced values generally for used vehicles once we start to come out of this difficult period.”