FCA extends coronavirus special measures to payday lenders and other firms

After announcing similar measures in other areas of the consumer credit sector in previous weeks, the Financial Conduct Authority has announced new protections for borrowers in five more areas in light of the pressures on consumer finances caused by the coronavirus epidemic. These five areas are:

  • High-cost short term credit (which includes payday loans)
  • Motor finance
  • Buy-now pay-later (BNPL) agreements
  • Rent-to-own (RTO) agreements
  • Pawnbroking agreements

In each of these areas, firms must offer a three-month payment freeze to any customers who are experiencing temporary difficulties meeting their repayments due to the effects of coronavirus, e.g. because they have lost their job, or are receiving reduced earnings. The exception to the three-month requirement is payday loans – here only a one-month freeze needs to be offered, in recognition of the fact that these loans are of shorter duration and have higher interest rates.

In addition to the payment freeze requirements, the following obligations apply to firms in each business area:

High-cost short term credit

  • No additional interest should be charged as a result of the payment freeze
  • Lenders should use the one-month period to engage with their customers to understand whether they are likely to be in a position to resume payments after the freeze period. Where this is unlikely to be the case, lenders are expected to provide additional forbearance in line with existing FCA rules, for example the firm could offer to delay payment until after the end of the term or could agree to accept payment via a number of smaller instalments

Motor finance

  • If customers require use of the vehicle, firms should not take steps to end the agreement or repossess the vehicle
  • Firms should not recalculate Personal Contract Purchase (PCP) balloon payments based on a temporary depreciation of car prices caused by the coronavirus situation
  • If a customer cannot make a PCP balloon payment due to coronavirus-related issues, the firm should work with the customer to reach an amicable solution


  • The promotional period should be extended by three months where a customer is still within this period


  • If a customer needs the goods during the guidance period, repossession should not take place


  • The redemption period should be extended for the duration of the three-month payment freeze extension
  • If the redemption period has already ended, the firm must agree not to serve notice to sell an item that has been pawned for the duration of the payment freeze period
  • If a notice of sale has already been served, the sale must be suspended for the payment freeze period

RTO / pawnbroking

  • If a firm is unable to take payment, collect or repossess goods due to social distancing arrangements, they should not pass on any additional charges or fees to the customer

BNPL / RTO/ pawnbroking

  • Firms should consider the amount of interest which may accumulate if payment freezes were to take place, and consider if it may be appropriate to waive interest and charges and/or re-schedule the repayment term

The measures came into force on April 27 and will apply for three months. They do not prevent firms from offering more generous forbearance to their customers if they deem this to be more appropriate.

Christopher Woolard, Interim Chief Executive at the FCA, said:

“We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article