StepChange welcomes FCA forbearance guidance on motor finance and payday loans

StepChange Debt charity welcomes the Financial Conduct Authority’s draft new guidance on how coronavirus-related forbearance for affected customers should be offered by providers of motor finance and payday loans. However, the charity believes that further measures are likely to be needed further down the line.

Richard Lane, Director of External Affairs at StepChange, says: “The proposed new measures on car finance and high cost short term credit fill some of the gaps that were left in the previous approach required by the FCA to firms’ offering of forbearance to people suffering loss of income due to the pandemic. This is helpful to give people time to work out what their future situation may hold, but the one-month freeze on payday loans is unlikely to be long enough to allow people to take a realistic view of the future.

“What is becoming urgent is to gain some understanding of what lenders will do at the end of the initial forbearance period – we think it is unlikely that most people whose income has been affected will be fully back on their feet and able to resume normal payments plus repayment of the sums accumulated during the forbearance period by that time. It’s likely that forbearance periods will need to be extended.”

StepChange will submit a response to the FCA consultation by the deadline on Monday 20 April.