Updated: Level of fleet support revealed as FCA guidance published

Thousands of fleet customers have received payment holidays due to coronavirus as the vehicle finance industry welcomes guidance from the Financial Conduct Authority (FCA) for the consumer market .

Lloyds Banking Group, owners of Lex Autolease, told Fleet News it has introduced a range of options to help businesses.

Richard Jones, motor finance and leasing at Lloyds Banking Group, said: “We have already granted payment holidays to more than 3,000 of our fleet customers. 

“Those with up to 20 vehicles on fleet can apply to defer their payments online, and those with fleets of more than 20 vehicles should contact their account manager directly to discuss the support that’s on offer.”

Jones also welcomed the proposed package of measures from the FCA to support consumers facing payment difficulties for vehicles due to coronavirus.

The FCA has said it expects firms to provide a three-month payment freeze to customers, who are having temporary difficulties meeting finance or leasing payments.

If customers are experiencing temporary financial difficulties due to coronavirus, firms should not take steps to end the agreement or repossess the vehicle, it said.

The FCA has also proposed that:

• Firms should not change customer contracts in a way that is unfair.  For example, firms should not try to use temporary depreciation of car prices caused by the coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. It will expect firms to act fairly where terms are adjusted.
• Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.

The proposals, it says, are intended to complement the measures already announced by the Government to support consumers during the COVID-19 pandemic.

Christopher Woolard, interim chief executive at the FCA, said: “We are very aware of the continued struggle people are facing as a result of the pandemic. These measures build on the interventions we announced last week, and will provide much needed relief to consumers during these difficult times.

“We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support.

“If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.”

The British Vehicle Rental and Leasing Association (BVRLA) has urged the FCA to work with its colleagues in Government to ensure all motor finance customers get the appropriate support during the COVID-19 crisis.  

Although it welcomes the flexibility offered within the guidance, the BVRLA in its response has made the case for a closely coordinated approach from Government and regulators that: 

• Underwrites the full economic loss resulting from coronavirus forbearance. 
• Relaxes the constraints of meeting the Consumer Credit Act’s administrative requirements. 
• Ensures that bank covenants don’t prevent leasing companies from providing forbearance. 
• Delivers a clear message to consumers that a three-month payment deferral is not the automatic response to every forbearance request. 

“Motor finance is a very different product to credit cards or mortgages, so we appreciate the time and consideration the FCA has given in developing a specific approach for our sector,” said BVRLA chief executive, Gerry Keaney.

“BVRLA members are united in wanting to support all their private and corporate customers, but they are being asked to provide unprecedented levels of forbearance that come with huge additional financial risks.

“The Government needs to help all parts of the motor finance sector – bank-owned and independent – in dealing with the economic fallout of the Coronavirus outbreak. By doing this it can safeguard the funders that will deliver transport decarbonisation in the future.”

Adrian Dally, head of motor finance at the Finance and Leasing Association (FLA), welcomed the FCA’s proposals. “They broadly mirror the forbearance measures that motor finance lenders have been providing to their customers over recent weeks,” he said.

“During this unprecedented period, every lender has recognised that forbearance is a vital bridge for customers whose income has been disrupted, and the industry has committed significant resource, human and financial, to meeting requests for support.  

“To enable this level of support to be maintained for customers, the industry will need some help from Government, and those discussions need to begin in earnest, with decisions reached rapidly.”

Mark Turner, MD at Duff & Phelps’ Compliance and Regulation Consulting, added: “The FCA’s decision to introduce payment holidays for motor finance loans will have come as a great relief for many borrowers in the UK.

“As many customers are facing an unexpected change in circumstances, it’s promising to see the industry has come together with regulators and Government officials to support those who may be facing financial difficulty as a result of the COVID-19 crisis.”