The FCA has announced new plans that would provide continued support for users of high cost credit products who continue to face payment difficulties due to coronavirus.

The proposals outline the options firms will provide buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking customers who are coming to the end of a payment freeze, as well as those who are yet to request one.

For customers yet to request a payment freeze, the time to apply for one under the extended terms would be until 31 October 2020.

For BNPL customers, where a loan is within the promotional period, the FCA suggested its proposals would mean offering customers an additional extension to that period. For pawnbroking agreements, where the loan is within the redemption period, the plans would mean firms extending that period for three months – as well as firms agreeing not to sell or suspending the sale of an item for three months, if the redemption period has already finished.

FCA interim chief executive, Christopher Woolard, said: “It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance 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 interest to do so, but for those that need help it will be there.”

The regulator has also included proposals for users of motor finance products, and stated that firms should provide customers with support by freezing or reducing payments to a level they can afford, on their BNPL, RTO or motor finance agreements for a further three months.

Hargreaves Lansdown personal finance analyst, Sarah Coles, commented: “Putting off loan payments should be a last resort rather than a first port of call. If you’ve already deferred payments on car finance, BNPL, RTO or pawnbroking for three months, you could put it off for another three months.

“But this comes with serious costs. Not only will your interest be rolling up, but it could also make it much harder and more expensive for you to borrow in future. Although it can’t affect your credit record, companies will be able to take payment breaks into account when they consider whether or not to lend to you in future. You need to consider whether it’s worth the risk of not being able to get a mortgage further down the line.

“Before you consider deferring payments, take a good look at your budget. If you can cut your spending to the bare minimum at least in the short term, and still make your repayments, then facing the pain now will save you from more agony later.”

The FCA said it is welcoming comments on its proposals until 5pm on 6 July 2020 and expects to finalise the guidance shortly afterwards.

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