Debt warning over car finance payment holidays

by Carter Toni

A week ago, the regulator instructed lenders to provide payment holidays to customers who require them.

finance payment holidays

But BBC Radio 5 Live finds that buyers of some vehicle finance providers still weren’t granted breaks, despite asking during the last six days.

Nevertheless the industry body for lenders appear at first sight doing everything they are able to.

In 2019, consumers lent £38bn to invest in cars.

Tamara Ellison, from Suffolk, had only began a brand new job in a graphics agency when the organization placed her on furlough in March.

Speculate the 48-year-old had only began using the firm, she wasn’t qualified for that government’s Job Retention Plan, which provides coverage for 80% of people’s wages up to and including cap of £2,500.

Tamara, whose earnings will also support her husband and 13-year-old boy, has spent the final six days attempting to agree a pay holiday with Volkswagen Financial Services (VFS), on her behalf Volkswagen T-Roc, with no success. She pays £302 per month in vehicle payments.

The 2009 week, she told the BBC: “The vehicle finance is my greatest outgoing and when they take another month’s payment, the sacrifice must be food and utilities. I’ve got payment holidays on some utilities, but not every one of them.

“It is so frustrating since i flagged this for them on 19 March – it isn’t for that want of attempting.”

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Following the BBC contacted VFS now, Tamara’s payment holiday was approved, but she states the procedure is a “nightmare”.

‘I can ill pay the next payment’

David Needham, 63, a salesperson from West Sussex, had just signed a finance deal for any new Audi A6 on 2 March which costs £635 monthly.

But simply 11 days later, the grandfather-of-two was furloughed. He has additionally been trying to have a payment holiday with VFS since 19 March, without results.

“Whenever you element in the insurance coverage around 1 / 3 of my furlough earnings has become happening my vehicle and I have still got bills to pay for,” Mr Needham told the BBC.

“I travel a great deal for work and also have an allowance in my vehicle. A great deal of salespeople come in exactly the same position as me – they’ll enjoy a new vehicle at the beginning of the financial year that they can’t afford.

“I’m able to ill make the following payment, but when I do not, I’ll fall under arrears and I am worried which will mean Then i don’t entitled to the payment holiday.”

On Friday 24 April, the Financial Conduct Authority (FCA) – the town regulator – finalised its package of measures, which put down how car lease customers ought to be supported with the lockdown.

It stated lenders ought to provide a 3 month payment freeze to those who are experiencing temporary difficulties meeting finance payments.

Most financiers, however, did not wait for a guidance to become issued before beginning to provide payment holidays.

Based on the Finance and Leasing Association (FLA), within the six days to 17 April, lenders received around 425,000 forbearance demands and granted 312,000 – including payment holidays, payment reductions, waived interest or extending the word of the agreement.

However, VFS stated it just began offering payment holidays on Monday 27 April, following the regulator’s guidance was finalised.

However it states it did curently have other support measures in position which customers could access.

VFS stated it provides a variety of choices for customers in financial difficulty, the newest to be the option to try to get a 3-month payment deferral.

It stated it’d seen “significant demands with this option”, but for many people a repayment deferral would not be the best outcome, by which situation the firm offers “a variety of options so we use the client to get the best solution”.

VFS’ spokesman added: “Since the beginning of the lockdown, we’ve prioritised the requirements of our customers simultaneously as modifying the way you work, to keep our colleagues safe and well.

“Which means that we’re doing things a little differently so we might take more than normal returning to customers. The easiest method to get in contact is to apply our online services and we’d recommend contact by telephone only when on the internet is unavailable.”

‘Real hardship’

Peter Tutton, mind of policy at debt support charitable organization StepChange stated: “As the FCA has had welcome and unparalleled action to assist individuals impacted by the present crisis, it’s obvious you may still find people at risk of experiencing real difficulty, because of issues with their vehicle financing contracts.

“We’d urge firms to complete all they are able to you may anticipate this and also to treat their customers as fairly as you possibly can within the coming several weeks.”

He added that lenders could stop individuals from falling into problem debt by suppressing “treating non-payments as defaults by offering appropriate forbearance to individuals who require it”.

Stuart Carmichael, leader from the Debt Support Trust, states a delay in saying yes payment holidays will be a huge concern for just about any driver during this period of “unparalleled financial uncertainty”.

But he cautioned it might be a specific concern for purchasers who already had pre-existing arrears, since the new guidelines say lenders don’t have to offer them a coronavirus payment holiday.

Rather, customers who’ve already missed payments might have to depend on existing provision for those who enter into financial difficulty.

“It’s these folks we be worried about most,” he told the BBC.

“You might have out of work and missed a few payments in the past, but have back in line with a brand new job as well as an agreed intend to from the arrears – and today you have been furloughed and you are stuck. It does not appear fair.”

A spokeswoman for that FLA stated that where demands had not worked with, it may be since the loan provider was awaiting an answer in the customer, or even the customer might be browsing a queue, because of the high volumes of demands.

She added: “If your customer is nearing a repayment date but still hasn’t been told by their loan provider, then please make contact with them again.”

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