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Freeze on car loan and pawn payments set to be extended

Freeze on car loan and pawn payments set to be extended
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"It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need," said Christopher Woolard, interim chief executive at the FCA.

"For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there."

The FCA also plans to extend the ban on repossessions until 31 October for motor finance and rent-to-own customers still facing temporary payment difficulties and who need their vehicles or goods.

Image caption The proposals also cover pawnbroking schemes

The FCA, , said lending firms should contact their customers at the end of a first payment freeze to find out if they can resume payments.

It pointed out that if customers can afford to return to making regular repayments it is in their best interest to do so.

If customers can afford to restart repayments, lenders should agree a plan on how the missed payments could be repaid.

Customers who have not yet had a payment freeze would be able to request one up until 31 October 2020.

Debt charity Step Change warned of the long-term dangers of payment freezes on struggling borrowers.

"Financial pressure continues to build for many households and we need to start thinking about the help people will need the payment holiday periods end," said Richard Lane, director of external affairs at the charity.

"With more than four million people borrowing to make ends meet since the start of the pandemic, the FCA needs to address how to prevent long-term consequences for those forced into debt due to coronavirus."

Adrian Dally, head of motor finance at the Finance & Leasing Association, said: "The breadth of today s guidance from the FCA recognises the variety of different situations that customers will be in at this point."

He pointed out that with more parts of the economy reopening, many customers will be returning to work and will be able to resume full payments.

"For those returning to part time work, partial payments are an option," he said. "Customers who still need ongoing help will of course be supported."

The FLA said the government now needs to support the motor finance lending industry "so that it is able to continue to offer finance to consumers and businesses at affordable rates during the recovery".
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