FCA motor finance: comment

Ahead of the expected finalisation of the FCA’s plans to provide a 3-month payment freeze for motor finance customers tomorrow, John Perez, Head of Finance Litigation, DWF, said: “The FCA’s proposed measures will likely impact a large proportion of motor finance lenders and their customers, so firms need to ensure they have the necessary operational resource in place. This will be particularly challenging when dealing with a workforce which is largely working remotely, along with the expectation for firms to implement the necessary system and process changes in such a short period of time. It is likely that some lenders will raise this as an issue during the short consultation period.

“Lenders will need to supress their systems to ensure that during the payment holiday the agreement is not treated as having gone into arrears, and to take particular care when reporting to credit reference agencies, ensuring that customers’ credit files are not adversely affected in any way.

“It will also be important for them to reach a consensus on how they will treat the original finance agreement – whether to formally raise a modifying agreement or to treat the payment holiday as a concession. Whichever option is agreed upon, it’s crucial that lenders clearly communicate the exact terms and effect of the payment holiday to their customers.

“Lenders must also prepare for the end of the three-month period, as it is very likely that many of the impacted customers will remain in need of ongoing support.”