Trade association the Finance and Leasing Association (FLA) has called for urgent Government assistance to be provided to the personal finance sector after customer requests for forbearance to its member firms reached 1.2 million. This is just the figure reported by firms who are members of the Association, and the true figure for the sector is likely to be a good deal higher.
One of the startling things about the coronavirus pandemic is how quickly things have changed, after all as recently as mid-March the UK public were still visiting the pub and continuing with their normal lives.
The Financial Conduct Authority’s first major actions to protect consumer credit borrowers came on April 9:
- Customers with an overdraft who had been affected by the health emergency were allowed a three-month interest-free period on £500 of the balance
- Firms were expected to offer a temporary payment freeze on loans and credit cards where consumers faced difficulties with their finances as a result of coronavirus, for up to three months
From April 24, firms were expected to offer three-month payment freezes to anyone experiencing difficulty with motor finance payments, and a one-month payment freeze to anyone who was in difficulty on a high interest short-term product, such as a payday loan.
By May 7, the FLA reported that its members had received 1.2 million requests for forbearance from customers since the FCA made these announcements. It added that 75% of these requests had already been approved – some other requests may still be under consideration.
Many lenders and credit providers have been forced to provide this hugely costly forbearance at a time when their own new business volumes are falling sharply for a variety of reasons related to Covid-19.
The current health emergency does of course mean that people cannot spend money on many of the things for which they might normally take out credit, or it’s harder to purchase certain big-ticket items, for example:
- A holiday – the Government is still advising against all but essential travel to all other areas of the world, and all UK hotels and other holiday accommodation remain closed for holiday purposes
- A car – car showrooms remain closed
- A wedding – all UK weddings are cancelled with no indication of when they can resume
- Home improvements – internal building work in an occupied property isn’t currently permitted
Most firms have reported increased sickness absence, and some firms have been uneasy about asking staff to report for work altogether amid concerns for their safety.
FLA statistics concerning new business volumes include:
- New business volumes in the car finance sector in March 2020 were 29% lower than in March 2019
- New business in the second charge mortgage sector in March 2020 fell by 14% compared to the same month in the previous year
- Consumer finance new business was down by 16% when the same measure is used
- Credit card and personal loan new business fell by 10%
Stephen Haddrill, director general at the FLA, called for immediate government support for his members, saying:
“The asset, consumer and motor finance markets have been hit hard by the measures taken to deal with the coronavirus crisis, with a 20 percent fall in new business in March alone.
“FLA members have also faced almost 1.2 million Covid-19 related requests for forbearance, of which 75 percent have already been granted. The industry is committed to supporting their customers during these exceptional times.
“Urgent action is needed – in days, not weeks – to deliver financial support to the non-bank lending sector to ensure that we maintain a financial services sector that is diverse, innovative and competitive.”
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