UK Auto Loans and Pawnbroker Payments Freeze Extended | Financial conduct authority

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The UK’s financial regulator is offering auto loan borrowers and users of other high-cost forms of credit the opportunity to freeze payments and foreclosures for another three months, amid concerns over the growing economic toll of the coronavirus pandemic.

The Financial conduct authority (FCA) said on Friday that customers of the auto loan, buy it now, lease with option to buy and pawnshop have the right to request a freeze or reduction of payments for an additional three months if they they had previously requested a postponement or reduction of payments. Asking for the support should have no impact on their credit records, FCA said.

The extension also means borrowers who have not yet requested a payment freeze can reapply to do so until October 31. However, some loans, including those that finance the purchase of cars, will continue to earn interest during a freeze, so the FCA advises those who can make repayments to do so.

The option to freeze payments has been hurriedly introduced in April because the regulator was faced with the prospect of massive defaults by borrowers unable to work or at reduced wages as part of the government’s job retention program.

The FCA last month extended similar measures for providers credit cards and other loans amid concerns over widespread financial hardship.

UK consumers have paid off billions of pounds in debt as leisure spending plummets – including repayments of a record £ 7.4bn in consumer credit in April – but charities fear that many households hit by increased debt.

The end of the leave scheme – also scheduled for October 31 – raises particular concerns, which should lead to a significant increase in unemployment.

Christopher Woolard, FCA Acting Chief Executive Officer, said: “It is essential that people facing temporary payment difficulties due to the impact of the coronavirus get the help they need. For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interests to do so, but for those who need help, it will be there.

The new rules mean auto finance providers have been banned from repossessing cars until October 31. The government continues to ask the public to avoid public transportation, which means cars are one of the only options for many longer trips. Repossession is also prohibited on items rented with an option to purchase.

The extension also means that pawn shops are not allowed to sell items given by customers as collateral for another three months.

Payday lenders, providers of short-term, high-cost credit, must also offer customers the option of forbearance for an additional three months.

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